Exam prep · Year 3 McGill style · advanced level
9 problems
micro, macro, e
conometrics
McGill
Year 3 practice Full solutions
every step worked o
ut
Advanced micro, advanced macro and econometrics: games, information,
dynamics and causal inference.
Unofficial practice based on public course descriptions for this level. Not affiliated with or
endorsed by McGill University.
, Micro · Problems 1 to 3 McGill · Year 3 style
Repeated games and collusion
Problem 1 Problem 2 Problem 3
Stage game Grim trigger Interest rates
Payoffs: both collude 10 each; defect Infinitely repeated, discount factor δ. δ = 1 ÷ (1 + r).
against colluder 15 (colluder gets 2); both
1. Payoff from colluding forever? 1. Largest r that still sustains collusion?
defect 4.
2. Payoff from defecting once? 2. Is collusion sustainable at δ = 0.4?
1. Nash equilibrium of the one-shot 3. Minimum δ for collusion?
game?
Unofficial practice · Solutions on the next page · McGill Year 3 style · 02
9 problems
micro, macro, e
conometrics
McGill
Year 3 practice Full solutions
every step worked o
ut
Advanced micro, advanced macro and econometrics: games, information,
dynamics and causal inference.
Unofficial practice based on public course descriptions for this level. Not affiliated with or
endorsed by McGill University.
, Micro · Problems 1 to 3 McGill · Year 3 style
Repeated games and collusion
Problem 1 Problem 2 Problem 3
Stage game Grim trigger Interest rates
Payoffs: both collude 10 each; defect Infinitely repeated, discount factor δ. δ = 1 ÷ (1 + r).
against colluder 15 (colluder gets 2); both
1. Payoff from colluding forever? 1. Largest r that still sustains collusion?
defect 4.
2. Payoff from defecting once? 2. Is collusion sustainable at δ = 0.4?
1. Nash equilibrium of the one-shot 3. Minimum δ for collusion?
game?
Unofficial practice · Solutions on the next page · McGill Year 3 style · 02
