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Consider a Cournot duopoly operating in a market with inverse demand P (Q) = 100 - Q; where = 91 +92 is the aggregate quantity on the market. Firm 1 is an incumbent in the market, so its costs are common knowledge and are given by TC₁ 10q₁. Firm 2 is a new entrant to the industry, so its costs are firm 2's private information. However, it is common knowledge that firm 2's cost function could be TC₂ = 492 with probability or TC₂ = 1092 with probability. = a) True or false? The game defined above is a game of incomplete information. True or false? The game defined above is a game of symmetric information. b)The incumbent can be of (1 or 2) type(s) with probability (0,2, or 1) of each. The entrant can be of (1 or 2) type(s) with probability (0, 12, or 1) of each. c) Represent this game in extensive form. d) What is the Bayesian Nash equilibrium in this Cournot duopoly game?

Consider a Cournot duopoly operating in a market with inverse demand P (Q) = 100 - Q; where = 91 +92 is the aggregate quantity on the market. Firm 1 is an incumbent in the market, so its costs are common knowledge and are given by TC₁ 10q₁. Firm 2 is a new entrant to the industry, so its costs are firm 2's private information. However, it is common knowledge that firm 2's cost function could be TC₂ = 492 with probability or TC₂ = 1092 with probability. = a) True or false? The game defined above is a game of incomplete information. True or false? The game defined above is a game of symmetric information. b)The incumbent can be of (1 or 2) type(s) with probability (0,2, or 1) of each. The entrant can be of (1 or 2) type(s) with probability (0, 12, or 1) of each. c) Represent this game in extensive form. d) What is the Bayesian Nash equilibrium in this Cournot duopoly game?

Algebra and Trigonometry (6th Edition)
Algebra and Trigonometry (6th Edition)
6th Edition
ISBN:9780134463216
Author:Robert F. Blitzer
Publisher:Robert F. Blitzer
ChapterP: Prerequisites: Fundamental Concepts Of Algebra
Section: Chapter Questions
Problem 1MCCP: In Exercises 1-25, simplify the given expression or perform the indicated operation (and simplify,...
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Consider a Cournot duopoly operating in a market with inverse demand P (Q) = 100 - Q; where Q = 91 +92 is the aggregate quantity on the market. Firm 1 is an incumbent in the market, so its costs are common knowledge and are given by TC₁ = 10g₁.Firm 2 is a new entrant to the industry, so its costs are firm 2's private information. However, it is common knowledge that firm 2's cost function could be TC₂ = 492 with probability or TC₂ = 1092 with probability. = a)True or false? The game defined above is a game of incomplete information. True or false? The game defined above is a game of symmetric information. b)The incumbent can be of (1 or 2) type(s) with probability (0, 2, or 1) of each. The entrant can be of (1 or 2) type(s) with probability (0, 2, or 1) of each. c) Represent this game in extensive form. d) What is the Bayesian Nash equilibrium in this Cournot duopoly game?
Transcribed Image Text:Consider a Cournot duopoly operating in a market with inverse demand P (Q) = 100 - Q; where Q = 91 +92 is the aggregate quantity on the market. Firm 1 is an incumbent in the market, so its costs are common knowledge and are given by TC₁ = 10g₁.Firm 2 is a new entrant to the industry, so its costs are firm 2's private information. However, it is common knowledge that firm 2's cost function could be TC₂ = 492 with probability or TC₂ = 1092 with probability. = a)True or false? The game defined above is a game of incomplete information. True or false? The game defined above is a game of symmetric information. b)The incumbent can be of (1 or 2) type(s) with probability (0, 2, or 1) of each. The entrant can be of (1 or 2) type(s) with probability (0, 2, or 1) of each. c) Represent this game in extensive form. d) What is the Bayesian Nash equilibrium in this Cournot duopoly game?
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