Reference: http://faculty.smu.edu/ozerturk/5341-hmw1-final-solutions.

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Question:
A game has two players. The first player can undertake one of two actions: T and B. The
second player also can undertake one of two actions: L and R. The payoffs resulting from the
undertaking of these actions are given by the following table:
Player 2 L R T - 1, 4 1, 5
Player 1 B 0, 2 -1, 0
a) Assume that the actions have to be undertaken simultaneously. Represent the game in
extensive form. Find all (pure and mixed strategy) Nash equilibrium of the resulting game.
b) Assume that Player 1 is the first mover and Player 2 can observe the action undertaken by
Player 1. Represent the resulting game both in extensive and normal forms.
Find all pure Nash equilibrium.
Find the Sub game Perfect Nash equilibrium of the game.
c) Assume that the game in part a) is repeated an infinite number of times. Let? Be the
discount factor. What are the entire SPED (in pure strategies) if? Tends to 0? What are the
entire SPED (in pure strategies) if? Tends to 1?
d) How can we select among equilibrium, when there is more than one?

ANS-
Context header: Game theory
Context explanation: Game theory is the study of mathematical model strategy which is taken
by rational decision make on the basis of different player or components involving in game
theory. In economic it has great use in analyzing the economic theory. The player is in
interaction with each other.
Answer and explanation:
A.
If both the players play simultaneous then T, R and B, L will be the Nash equilibrium as the
pay off are 1 to player 1 and 5 to player 2.
1 is greater than -1 and
5 are greater than 4.
Same is that case with B, L. thus this is Nash equilibrium.

B.
If the game is sequential game its extensive representation as
Pure Nash equilibrium is T, R and B, L. whereas sub game perfect equilibrium is T, R