Two states, A and B, have signed an arms-control agreement. This agreement commits them to refrain from building certain types of weapons. The agreement is supposed to hold for an indefinite length of time. However, A and B remain potential enemies who would prefer to be able to cheat and build more weapons than the other. The payoff table for A (player 1, the row player) and B (player 2, the column player) in each period after signing this agreement is below.

Two states, A and B, have signed an arms-control agreement. This agreement commits them to refrain from building certain types of weapons. The agreement is supposed to hold for an indefinite length of time. However, A and B remain potential enemies who would prefer to be able to cheat and build more weapons than the other. The payoff table for A (player 1, the row player) and B (player 2, the column player) in each period after signing this agreement is below.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.9P

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