Business, 11.11.2020 18:00 arcanos616p53hw1

Consider a game of Mutually Assured Destruction played by two superpowers, Country 1 and Country 2. Country 2 has precipitated an international incident. Country 1 can either ignore the incident or escalate the crisis. If it ignores the incident the game ends and both countries receive a payoff of 0. It if escalates, then Country 2 can either escalate further or back down. If it backs down, then the game ends, Country 1 receives a payoff of 2, and Country 2 receives a payoff of -2. If Country 2 escalates further then 1 and 2 play a game where they move simultaneously. Each has two strategies in this subgame: Back Down or Doomsday. The payoffs in the subgame are as follows: Country 2 Doomsday Back DownCountry 1 Doomsday -100, -100 -100, -100 Back Down -100, -100 -1, -1Find all subgame perfect Nash equilibria of this game.

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Consider a game of Mutually Assured Destruction played by two superpowers, Country 1 and Country 2....

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