Q.3 Two firms produce homogeneous products. The inverse demand function is given by: p(x₁, x2) = 80x₁x2, where x₁ is the quantity chosen by firm 1 and x₂ the quantity chosen simultaneously by firm 2. The cost function of firm 2 is C₂ (x₂) = 20x₂. The cost function of firm 1 is C₁ (x₁) = C₁x₁. Nature chooses C₁ = C₁ = 15 with probability 0.5 and c₁ = CH = 25 with probability 0.5. While firm 1 observes nature's choice, firm 2 cannot observe that choice. Identify the static Bayesian Nash equilibrium.

Q.3 Two firms produce homogeneous products. The inverse demand function is given by: p(x₁, x2) = 80x₁x2, where x₁ is the quantity chosen by firm 1 and x₂ the quantity chosen simultaneously by firm 2. The cost function of firm 2 is C₂ (x₂) = 20x₂. The cost function of firm 1 is C₁ (x₁) = C₁x₁. Nature chooses C₁ = C₁ = 15 with probability 0.5 and c₁ = CH = 25 with probability 0.5. While firm 1 observes nature's choice, firm 2 cannot observe that choice. Identify the static Bayesian Nash equilibrium.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

ChapterB: Differential Calculus Techniques In Management

Section: Chapter Questions

Problem 5E

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