Homework Answers
Consider the given game here both the players having two possible strategies these are “cooperate” and “defect”. Now, “d” be the discount factor. So, a player will decide to cooperate if the present value of cooperation is more than defect.
=> (50 + 50*d + 50*d^2 + ….) > (125 + 10*d + 10*d^2 + ….)
=> 50/1-d > 125 + 10*d/1-d, => 50 – 10*d > 125*(1-d), => 50 – 10*d > 125 - 125*d, => 125*d – 10*d > 125 – 50.
=> 115*d > 75, => d > 75/115 = 15/23.
So, a player will ensure cooperation if “d” is more than “15/23”.
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