INFINITE REPETITION Consider the infinitely repeated game constructed from the following stage game. b1 b2 a1 8,8 3,13 a2 13,3 0,0 Suppose that both players use the discount factor & to evaluate future payoff streams. What is the smallest value of d such that there exists a subgame perfect Nash equilibrium in which the action profile is played in all

Managerial Economics: A Problem Solving Approach
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Chapter15: Strategic Games
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INFINITE REPETITION
Consider the infinitely repeated game constructed from the following stage game.
b1
b2
a1
8,8
3,13
a2
13,3
0,0
Suppose that both players use the discount factor d to evaluate future payoff streams.
What is the smallest value of 5 such that there exists a subgame perfect Nash equilibrium in which the action profile <a1,b1> is played in all
periods? (Please report your answer in decimal form, rounded if necessary to the nearest 0.01.)
Transcribed Image Text:INFINITE REPETITION Consider the infinitely repeated game constructed from the following stage game. b1 b2 a1 8,8 3,13 a2 13,3 0,0 Suppose that both players use the discount factor d to evaluate future payoff streams. What is the smallest value of 5 such that there exists a subgame perfect Nash equilibrium in which the action profile <a1,b1> is played in all periods? (Please report your answer in decimal form, rounded if necessary to the nearest 0.01.)
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