Problem 5: Limited Punishment Consider the game in table 3. The game is repeated infinitely. Both players discount payof

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Problem 5 Limited Punishment Consider The Game In Table 3 The Game Is Repeated Infinitely Both Players Discount Payof 1 (95.3 KiB) Viewed 33 times

Problem 5: Limited Punishment Consider the game in table 3. The game is repeated infinitely. Both players discount payoff streams using the discount factor d = 0.9. Players both play limited punishment trigger strategies with a punishment phase of T periods. Determine the length of the punishment period that is required to support (4,4) as the payoff in every stage of a Nash equilibrium. (I.e., how small can we make T, such that no player finds it optimal to deviate in any period?). Player 2 ti t2 t3 S1 1,1 21,0 0,0 Player 1 S2 0,21 4,4 0,1 S3 0,0 1,0 -1,-1 Table 3: The Game