Game Theory Question 2

2. Two players are engaged in a infinitely repeated game whose stage game is shown below.

L R

U 5,5 1,2

D 6,2 2,4

a) Find all feasible individually rational payoffs.

b) Is payoff (5,5) possible in an SPE (assuming is sufficiently large)? Why?

c) Can you suggest a simple trigger strategy achieving payoff (5,5)? (Hint: find NE of

the stage game and recall the weak perfect folk theorem.)

d) What is the smallest value of making this simple trigger strategy possible?