Discussion:
1.How did the financial crisis of 2007-2009 affect the size and composition of the balance sheet of the Federal Reserve?
2.In Chapter's 12 and 13 we discussed strategic interactions among multiple actors in a transaction. We discussed how it is useful to display payoffs in a matrix that simultaneously shows the payoffs for both players. I had you watch a video on a television game show "Golden Balls" where the players must make a decision at the end of the game to split or steal the final winnings. Here is a link to the video: https://www.youtube.com/watch?v=p3Uos2fzIJ0
Please illustrate the payoffs for each of the players in a 2x2 matrix and determine what the Nash Equilibrium is of the game. Given that the game is only played once, how should each player play? What is the likely payoff for each player? How would you play and why (be honest here)? How might the players differ their strategy if the game is played multiple times? Could building a "reputation" be helpful for the players if they are playing the game multiple times? What type of reputation would one want to develop to have a higher payoff playing multiple times?