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Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter8: Game Theory
Section: Chapter Questions
Problem 8.1P
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2. Consider the static game represented by the following payoff matrix:
r
с 1,1
2, -1
-1,2
R
0,0
(a) Find the Nash equilibrium of the above game.
(b) If above static game is repeated T <o times without discounting of
payoffs, what will be its subgame perfect Nash equilibrium?
(c) If the above static game is repeated an infinite number of times with
payoff discount factor being ổ = , what will be its subgame perfect
Nash equilibria? Interpret the economic meaning of parameter y.
Explain the intuition how parameter y can affect the equilibrium
outcome of the game.
Transcribed Image Text:2. Consider the static game represented by the following payoff matrix: r с 1,1 2, -1 -1,2 R 0,0 (a) Find the Nash equilibrium of the above game. (b) If above static game is repeated T <o times without discounting of payoffs, what will be its subgame perfect Nash equilibrium? (c) If the above static game is repeated an infinite number of times with payoff discount factor being ổ = , what will be its subgame perfect Nash equilibria? Interpret the economic meaning of parameter y. Explain the intuition how parameter y can affect the equilibrium outcome of the game.
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