Trigger Strategy Subgame Perfect Equilibrium - Economics Assignment Help

Assignment Task

Question #1. Consider a Cournot duopoly game that is repeated infinitely. Inverse demand function is P(Q)=a-Q where (Q=q1+q2) Both companies’ marginal cost is c and fixed cost is 0. (a>c>0) Both companies’ have a discount factor of δ ∈ (0,1) Cournot Nash Equilibrium quantity is qC=(a-c)/3 and optimal collusive quantity is qm=(a-c)/2 Select numbers for a,c,q’ that satisfy the condition qm/2

Question #2. Consider a dynamic game under complete and incomplete information in the order given below. 1) Player 1 chooses one among L,M,R 2) Player 2 sees if Player 1 chooses L or not and then chooses between L’ or R’. The game ends. a) Draw a game tree of this dynamic game. (without the incentives) List all the pure strategies. How many subgames are there? (whole games are counted as their subgames) b) Write incentive numbers on the game tree that satisfy the following conditions. Solve all pure strategy Nash equilibriums and Subgame perfect equilibriums. Condition

1: Incentive numbers are all different from each other. Condition

2: There are more pure strategy Nash equilibriums than Subgame perfect equilibriums

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