Exit, Voice, and Loyalty
Below is the Exit, Voice, and Loyalty game between the state and the citizen. Recall that E is the payoff that the citizen gets when she exits, L is the payoff that the state gets from retaining a loyal citizen, 0 is the payoff that the citizen gets from remaining loyal, and C is the cost that the citizen must pay for using voice.
Let E = 0.5, let L 1, and let C = 0.25.

-What is the subgame perfect Nash equilibrium or equilibria for the game if you use these payoff values? Recall that the equilibrium should be written in the following form: (citizen's move at her first node, citizen's move at her last subgame, state's move at his [only] subgame).

Question

Exit, Voice, and Loyalty
Below is the Exit, Voice, and Loyalty game between the state and the citizen. Recall that E is the payoff that the citizen gets when she exits, L is the payoff that the state gets from retaining a loyal citizen, 0 is the payoff that the citizen gets from remaining loyal, and C is the cost that the citizen must pay for using voice.
Let E = 0.5, let L > 1, and let C = 0.25.
 
-What is the subgame perfect Nash equilibrium or equilibria for the game if you use these payoff values? Recall that the equilibrium should be written in the following form: (citizen's move at her first node, citizen's move at her last subgame, state's move at his [only] subgame).

Quizplus · Accepted Answer

In subgame perfect Nash equilibrium, players make optimal decisions at every point in the game. Here, the citizen chooses "voice" at her first node, "exit" at her last subgame, and the state chooses "respond" at his subgame.