Question

1. Consider a repeated game in which the stage game in the following figure is played in each of two periods and there is no discounting. 1 LMR u 8,8 0,9 0.0 C 9,0 0,0 3,1 0 0.0 | 13 | 3.3 Fully describe a subgame perfect equilibrium in which the players select (U, L) in the first period.

Answer 1

We have to consider a repeated game in which the stage game in the following figure is played in each of two periods and there is no discounting. Repeated game is an extensive form game that consists of a number of repititions of some base game. This theory is not the only possible enforcement mechanism in informal arrangements. Stage game: A repeated game is a sequence of etage game in which each stage game is the form same normal game. Based on their knowledge of the game. i L M R • In the first period round 18,8 0,9 0,0 player I will select D as long as player a didn't deviate From L 0,0 3,1 o else in second sound player, Too 3,3 will select c. en 2- JA 9,0 13 . - - . The game is sub game in the second sound and the ((OM), CC, R), (B, R)} are the Nash Equilibrium of the stage game. First sound player a will select R in the second as long as player I didn't deviate Famo. . If player i player a agreed no one can deviate because they deviation SPNE that players on the will Select Strategy galo ad CUL profile, after