2 Problem 1 (Consider a Cournot duopoly with inverse demand funcion22 - (q +92) if q1 + 92 < 22,if q1 + q2 > 22.P(q1 + 42)The marginal cost of firm 1 is c = 7, and it is known to all firms while firm2's marginal cost c2 is private information. The probability distribution of c2,however, is known to all firms; c2 can take values of1C2 =with probability ,13 with probability .(a) Determine the best response functions of each firm.(b) Derive the set of Bayesian Nash equilibrium of the game.

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Problem 1 ( Consider a Cournot duopoly with inverse demand funcion 22 - (q +92) if q1 + 92 < 22, if q1 + q2 > 22. P(q1 + 42) 0. The marginal cost of firm 1 is ci = 7, and it is known to all firms while firm 2's marginal cost cz is private information. The probability distribution of however, is known to all firms; c2 can take values of C2, 1 C2 = with probability , 13 with probability . (a) Determine the best response functions of each firm. (b) Derive the set of Bayesian Nash equilibrium of the game.

Problem 1 ( Consider a Cournot duopoly with inverse demand funcion 22 - (q +92) if q1 + 92 < 22, if q1 + q2 > 22. P(q1 + 42) 0. The marginal cost of firm 1 is ci = 7, and it is known to all firms while firm 2's marginal cost cz is private information. The probability distribution of however, is known to all firms; c2 can take values of C2, 1 C2 = with probability , 13 with probability . (a) Determine the best response functions of each firm. (b) Derive the set of Bayesian Nash equilibrium of the game.

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

Chapter15: Contracting, Governance, And Organizational Form

Section: Chapter Questions

Problem 11E

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