Question

bi + b2 + b3) otherwise. . Assume 2Vs > L >202 Find a SPE of the game using Backward induction. 2. (20 points) Consider the infinite period 2 player alternating offer bar- gaining model with constants and identical discount factor 0< < Carefully explain what will be a SPE of the game

Answer 1

Inanite Bangareng→ c player, 8ame discountfacho 758, tte) at tisose, oBsto, eeing w Pd t value at t) sims elt at t CI), by assumption Game at t t2 are identicat Cas P, is pocoposes th bot

1-8 2 1-8 2 at (tt) a (152) (+8) It6 46) 1-8 onders)