How to calculate the discount factor that makes an infinitely repeated Prison's dilemma game a SPNE? (Sub-game perfect nash equilibrium).
This problem is with a modified tit for tat strategy as follows:
In any given history of the game, we say that a player, say prisoner 1, is in good standing if:
- Is the first period of the game
- On the previous period he played C and prisoner 2 was in good standing
- On the previous period he played C and he was in bad standing
- On the previous period he played D, he was in good standing and prisoner 2 was in bad standing
Consider the modified tit-for-tat strategy profile given by “Play C unless you are in good standing and your opponent is in bad standing, in which case you should play D”
Stage game Payoffs are:
C D
C: (4,4) | (0,6)
D: (6,0) | (1,1)
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Posted 17 May 2017 08:05 AM
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