Consider the following stage game. Suppose that stage game is infinitely repeate
ID: 1095144 • Letter: C
Question
Consider the following stage game.
Suppose that stage game is infinitely repeated in the following way.
In each period, both player 1 and 2 observe the actions of all previous periods.
h l H 4,3 0,2 L 5,0 3,1 Consider the following stage game. h l H 4,3 0,2 L 5,0 3,1 Suppose that stage game is infinitely repeated in the following way. Player1 is infinitely lived with discount factor delta in (0,1 ), and in each period a new player2 arrives, plays the game once and then leaves. (Thus, in each period, player2 is concerned only with his payoff in that period and not future payoffs.) In each period, both player 1 and 2 observe the actions of all previous periods. Describe a subgame perfect equilibrium strategy profile in which player 1 chooses H in every period on the equilibrium path, and derive the lower bound on deltaneeded.Explanation / Answer
delta's lower bound is 0.5 i.e delta should more than 0.5 and subgame perfect equilibrium is (H,h)
player 2 will play h aslong as player 1 plays H..once player 1 plays L afterwards player 2 will always play l..this is the subgame perfect equilibrium...