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Two individuals are playing a trust game which has three rounds In the first two rounds of the game they have accumulated

Two individuals are playing a trust game which has three rounds In the first two rounds of the game they have accumulated

Two individuals are playing a trust game which has three rounds. In the first two rounds of the game, they have accumulated $1,000 as a team. In the third round, Player 1 is blindfolded and asked to decide whether he would let Player 2 guide him to a particular destination or opt out of the game. If he lets Player 2 to guide him, Player 2 can either guide him to the correct destination or take him elsewhere. If he leads him to the correct destination, each of them will get half the accumulated money. On the other hand, if Player 2 can lead him astray, Player 2 will get 75% of the accumulated money and Player 1 will get 25%. If Player 1 opts out of the game, he will get 30% of the accumulated money and Player 2 will get 20%.

a)What is the equilibrium outcome in this case?

b)How will the equilibrium change if the players can impose a guilt penalty of 60% of the accumulated money on the defecting player?

27) Mark and Anthony are participating in a trust game. Mark is given a locked box containing five $100 bills and a key. He can either unlock the box himself or he can give it to Anthony. Anthony can either unlock the box himself or return it to the moderator of the game. If Mark unlocks the box himself, he will get $200 and Anthony will get $100 while the rest will be taken back. If Anthony unlocks the box, they will receive $250 each. If Anthony returns the box to the moderator, he will receive $300, while Mark will not get any money.

28) There are two players in a game. At each round of the game, one player has to trust the other for a particular task. In the first round, Player 1 has to decide whether he will trust Player 2. If does not trust Player 2, he will get one-third of the prize money while Player 2 will get the rest of the prize money. If he trusts Player 2, Player 2 can either cooperate with him or defect. If Player 2 defects, Player 1 will earn $0 while Player 2 will get the entire prize money. If Player 2 cooperates, each of them will get half the prize money.

abhinav behal 15-Feb-2020

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