Business, 06.05.2020 06:28 graceshort7orepzg
Consider the forgiving trigger punishment (i. e. partial punishment trigger, punish any deviation to confess with T rounds of (C, c)). How high does the value of the discount factor δ need to be in order for the nice guy behavior – (N, n) forever – to be achievable as part of a subgame perfect equilibrium? Your answer will depend on the length of the punishment phase T; try T = 3.
Calculate the minimum value of the discount factor δ for which the grim trigger strategy (infinite punishment for deviation to confess) is a subgame perfect equilibrium. Compare this minimum value of δ to the minimum value of the discount factor found in part a, which is bigger?
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