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# 1. a. The extensive form and find the SPE. Payoffs are in the form (Member A, Chairperson).

(2, 1) Chairperson (4, 2)
Member A

(1, 3) Chairperson (3, 4)
Subgame Perfect Equilibrium (SPE) is [(x), (X & Y, X & Y)] for (4, 2)

b. The chairperson would have reason to try and alter the outcome of the game with a strategic move. There is a first mover advantage in this game because whatever policy is gets proposed will end up getting passed. The chairperson has a couple of strategic moves available 1. Unconditionally committing to gain a ‘first-mover advantage’ will not work because it can only reduce his/her payoff; if he/she commits to Y, then the result would be [(X), (Y)] (2, 1) and if he/she commits to X & Y the payoff will stay the same at (4, 2).
 If the rules of the game could be changed by using the role as chairperson to become the first mover; for example, “Chairperson chooses to vote before all members”. This would give a new option “How would Member A react to Y being proposed? X for (1, 2) or X & Y for (4, 3)?” (payoffs are in the form Chairperson, Member A since the order is changed). This would get the desired payoff, but because this option is likely impossible, it should be disregarded. Explicitly Threaten to vote for Y if Member A votes for only X Implicitly Promise to vote for X & Y if Member A votes for X & Y.

2. Use a conditional threat & promise to change Member A’s initial vote
 

This would give the chairperson max payoff. Since we can assume the threat is credible, this would also benefit Member A because if he/she proposes only X, then his/her payoff would be 2; however, under the threat & promise the payoff would be 3.

Aggressive)] for (3. The US moves first and the USSR moves second. (Aggression)] for (2. 2) b. i. Using the formula of (Column Max. Row Max) for a Nash Equilibrium [(Aggression). Payoffs in the form of (US. 3) (1. 2) Subgame Perfect Equilibrium: [(Aggressive). The USSR moves first and the US moves second. (Restrained. Payoffs in the form of (USSR. 2) ii. Aggressive)] for (2. 4) . Subgame Perfect Equilibrium: [(Restrained).2. 4) (3. 1) (2. USSR US USSR (4. (Aggressive. USSR). a. US).

This is assuming there is no credible strategic moves that would end with the (Restrained. 2) Subgame Perfect Equilibrium: [(R.). Row Max) b. US). if the USSR is the first mover. This is shown in i. the US moves second. it is in the US’s best interest to always go Aggressive. 1) (1. -2) by the formula (Column Max. 3) (2./A. however. d. a. As long as the USSR moves after them. Sequentially./A. -2) Punish (-2. but the USSR has a further move in which they can change their first move. (Not Punish)] for (1. The USSR moves first. ii. and iii. USSR US USSR USSR USSR US USSR (3. they will go Aggressive because if the go restrained the USSR will opt for their highest payoff. 1) (1. child moves first . which is the outcome if the USSR moves last. 3) (2./A./A.iii./A. -3) Nash equilibrium is [(Bad). Restrained) result. 2) (3. Payoffs q are written in the form of (USSR. Both the US and the USSR are best off when the USSR is not the last mover.. A.. 3. which is the lowest for the US. the equilibrium is higher than it would be if they had both been Aggressive. This is because if the US moves before the USSR. 2) c.)] for (2. -1) (-1. it would not be in their best interest to go aggressive. 4) (4. Simultaneous-move game Child\Parent Good Bad Not Punish (0. (A.. 4) (4. 0) (1.