Answer to Question #227376 in Macroeconomics for Prabo

Question

 Consider the following game. Suppose that players play simultaneously over many periods. In each period, each player best responds to the action played by the opponent the period before.       

                                  L        M        R
                        U        0,0       4,5      5,4
                        M        5,4       0,0      4,5
                        D        4,5       5,4      0,0

Assume that in period 1, players start with the strategy profile (M,L). Describe play in the next 7 periods. Does a pattern emerge?

Answer 1

Period 1 ML strategy, player A will play ML, player B will play UR

Period 2 UM strategy, player A will play DM, Player B will play MR

Period 3 UR strategy, player A will play UR, player B will play ML

Period 4 DL strategy player A will play DM, player B will play UR

Period 5 DM strategy, player A will play ML, Player B will play UR

Period 6 UL strategy, player A will play ML, player B will play DM

Period 7 MM strategy player A will play DM, player B will play ML

A pattern emerges where by each player assumes a strategy that gives maximum payoff