For what values those trigger strategies an equilibrium

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Grim Trigger Practice -

Consider the following game: Players play this game over an infinite horizon with common discount factor δ ∈ (0, 1), where 4 > x > 2 > y > 0.

Let y = 1. Consider the following trigger strategies: player 1 plays up and player 2 plays left in every period; if any player ever deviates from that strategy, player 1 plays down and player 2 plays right. For what values of δ is this an equilibrium? How does this change as x increases?

Let x = 3. For what values of δ are those trigger strategies an equilibrium? How does this change as y increases?

Instructions: Show all work and explain your answers. No credit will be given for questions that don't show work, but partial credit will be given where applicable.

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Reference no: EM132284328

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