= Consider two firms with differentiated products, whose demand functions are given by: 9₁ = 2 - 2p1 + P2, and 92 = 22p2 + P₁, where q; and pi are their quantities and prices. Their constant marginal costs are given by: C₁, C₂. Assume that c2 1 is known to both firms, but c₁ is known only to firm 1. Firm 2 knows that c₁ can be either 1.2, or .8, with equal probabilities. The firms compete in prices in a simultaneous move game. (i) Find the equilibrium prices, (ii) explain what happens if private information can be revealed costlessly.
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Lecture: Imperfect Information syllables
1 Asymmetric Information
1.1 Principal-Agent Problems with Hidden Actions
1.2 General Discussion
2 TheGeneral-Principal Agent
3 A Simple Example of a Principal-Agent Problem
3.1 CASE1: FULL INFORMATION
3.2 Case2- Unobserved Effort
4 Principal-Agent - Hidden Information
4.1 CaseI: Complete Information
4.2 Diagram
4.3 CaseII: HiddenInformation
5 Education as a Signal
5.1 Perfect Information
5.2 Imperfect Information
5.3 Equilibrium (perfect Bayesian, PBE)
6 The Market for Lemons
6.1 Warranties as a Signal for Quality
7 Static
7.1 Revelation of Information
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