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Question from Past Microeconomics Qualifying ExamEdit

Fall 2005 - Section II, Question two, George Mason University

Two players play a Prisoners' Dilemma game followed by a Coordination Game. In the Coordination game, BOTH players prefer (Left, Left) to (Right, Right). Neither player discounts the future; ß=1. Consider the following candidate equilibrium: Both players Cooperate in the first game. Then in the second game:

  1. If both players Cooperated in the first game, both play Left.
  2. Otherwise, both players play Right.

Could this be a subgame perfect NE? Explain.

AnswerEdit

see MicroS05-II.3

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