Consider a duopoly with a Cournot competition. The demand of the market is Q-2-p. Both firm 1 and firm 2's marginal costs can take two values. For firm 1 it can be MC=5/4 with probability 1/3 and MC=3/4 with probability 2/3. For firm 2 it can be MC=5/4 with probability 2/3 and MC=3/4 with probability 1/3. Each firm knows its own MC but does not know the MC of the other firm. (But the probabilities are known to everyone.) What will be he Bayesian equilibrium of the game?

Consider a duopoly with a Cournot competition. The demand of the market is Q-2-p. Both firm 1 and firm 2's marginal costs can take two values. For firm 1 it can be MC=5/4 with probability 1/3 and MC=3/4 with probability 2/3. For firm 2 it can be MC=5/4 with probability 2/3 and MC=3/4 with probability 1/3. Each firm knows its own MC but does not know the MC of the other firm. (But the probabilities are known to everyone.) What will be he Bayesian equilibrium of the game?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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