In the lecture we have considered the situation of constant discount rates (u;= Six) where 8₁ = 8₂ = 8 and time does not matter much, i.e. 8 → 1. Now consider a situation where time does not matter much for one player. Time is still relevant for the other player. If player 1 is very patient we write 8₁ - 1. For player 2 we still have 8₂ < 1 a fixed number. What is the subgame perfect equilibrium of this game?

In the lecture we have considered the situation of constant discount rates (u;= Six) where 8₁ = 8₂ = 8 and time does not matter much, i.e. 8 → 1. Now consider a situation where time does not matter much for one player. Time is still relevant for the other player. If player 1 is very patient we write 8₁ - 1. For player 2 we still have 8₂ < 1 a fixed number. What is the subgame perfect equilibrium of this game?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter18: Auctions

Section: Chapter Questions

Problem 4MC

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