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:
- If both players Cooperated in the first game, both play Left.
- Otherwise, both players play Right.
Could this be a subgame perfect NE? Explain.