Week 11 - Repeated Games

Question 1

what is the cooperative strategy in a PD?

Answer 1

it is the strategy that, when played by both players, leads to the optimal outcome for society

Question 2

what is the defective strategy in PD?

Answer 2

the strategy that is the best response for the individual that when played by both, it leads to the worst outcome for society

Question 3

what will players do if there is finite repetition in PD?

Answer 3

they will continue to defect because when using backward induction, players will think there is no longer a future to consider and just defect

Question 4

what is a contingent strategy?

Answer 4

when a player’s strategy is dependent on their partner’s behavior in the previous round (in repeated games)

Question 5

what is a trigger strategy?

Answer 5

these are strategies which involve behaving cooperatively up until a trigger by your rival sets a period of punishment in motion

Question 6

what are the two common trigger strategies?

Answer 6

• grim strategy

- tit-for-tat strategy

Question 7

explain grim strategy?/

Answer 7

1) start by playing cooperate
2) continue cooperating until your rival defects
3) if they defect, punish them by choosing defect for every round for the rest of the game

Question 8

explain tit-for-tat strategy?

Answer 8

1) start by playing cooperate
2) choose in any given period (t) the chosen by your rival in the previous period of play (t-1)
- return to coop if your player coops

Question 9

what does r represent?

Answer 9

the rate of return / the discount rate

Question 10

FV formula?

Answer 10

FV = PV(1 + r)^n

Question 11

PV formula?

Answer 11

PV = FV / (1 + r)^n

Question 12

how to solve the PD?

Answer 12

prove that it isn’t worthwhile to defect once against a rival and prove it isn’t worthwhile to defect forever

Question 13

what is δ?

Answer 13

• (1 / 1+r)

- it is the discount factor