P1| P2LeftMiddleRightLeft4,23,31,2Middle3,35,52,6Right2,16,23,3Consider the simultaneous move game represented by this payoff matrix.Suppose that the game is repeated for two periods and the players know that the game will end at the end oftwo periods. They observe the first period outcome before they move to the second period.Assume that there is no discounting, i.e. 2nd period payoffs are not discounted, or the discount factor is equalto 1.Which of the following outcomes could occur in some subgame perfect equilibrium (SPE) of this repeatedgame? Choose True if you think the outcome can be a SPE, otherwise choose False.a) (Left, Left) is played in both periods.b) (Right, Right) is played in both periods.c) (Middle, Middle) is played in both periods.d) (Middle, Middle) is played in the first period, followed by (Left, Left).e) (Middle, Middle) is played in the first period, followed by (Right, Right).

Answer - Subgame perfect nash equilibrium :- Subgame perfect nash equilibrium is an equilibrium of…

P1| P2 Left Middle Right Left 4,2 3,3 1,2 Middle 3,3 5,5 2,6 Right 2,1 6,2 3,3 Consider the simultaneous move game represented by this payoff matrix. Suppose that the game is repeated for two periods and the players know that the game will end at the end of two periods. They observe the first period outcome before they move to the second period. Assume that there is no discounting, i.e. 2nd period payoffs are not discounted, or the discount factor is equa to 1. Which of the following outcomes could occur in some subgame perfect equilibrium (SPE) of this repeated game? Choose True if you think the outcome can be a SPE, otherwise choose False. a) (Left, Left) is played in both periods. b) (Right, Right) is played in both periods. c) (Middle, Middle) is played in both periods. d) (Middle, Middle) is played in the first period, followed by (Left, Left). e) (Middle, Middle) is played in the first period, followed by (Right, Right).

P1| P2 Left Middle Right Left 4,2 3,3 1,2 Middle 3,3 5,5 2,6 Right 2,1 6,2 3,3 Consider the simultaneous move game represented by this payoff matrix. Suppose that the game is repeated for two periods and the players know that the game will end at the end of two periods. They observe the first period outcome before they move to the second period. Assume that there is no discounting, i.e. 2nd period payoffs are not discounted, or the discount factor is equa to 1. Which of the following outcomes could occur in some subgame perfect equilibrium (SPE) of this repeated game? Choose True if you think the outcome can be a SPE, otherwise choose False. a) (Left, Left) is played in both periods. b) (Right, Right) is played in both periods. c) (Middle, Middle) is played in both periods. d) (Middle, Middle) is played in the first period, followed by (Left, Left). e) (Middle, Middle) is played in the first period, followed by (Right, Right).

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.7P

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