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DE F A 3,14,0 1,1 B 5,3 3,8 0,2 C 2,2 1,7 -1,1 To sustain a SPNE in which players play (C,D) in every period by means of a tr

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Answer #1

Answer is option C)

Correct answer is 5/6

Let discount factor for P1 = d1

= 2/1-6) Let P1 has discount factor ds & P2 discount factor & for P1, If sustain cooperation. Then Present value of discounte= 7+ 82 for P2, ve=2/(1-82), UD = 7+ 82 +82² + 3 + 4 ean = of Pl cooperates, plays , then P2 could higher t = 7, of or deviat

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