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3.3. Consider the following asymmetric-information model of Bertrand duopoly with differentiated products. Demand for firm 1' is q;(pi,pj) = a 1.9, b, 19,-. Costs are
3.3. Consider the following asymmetric-information model of Bertrand duopoly with differentiated products. Demand for firm 1' is q;(pi,pj) = a 1.9, b, 19,-. Costs are zero for both rms. The sen- sitivity of rm i's demand to firm j's price is either high or low. That is, b,- is either bug or bL, where by; > by, > 0. For each rm, b, = bH with probability 9 and b,- = In, with probability 1 - 6, in- dependent of the realization of b!\" Each rm knows its own I),- but not its competitor's. All of this is common knowledge. What are the action spaces, type spaces, beliefs, and utility functions in this game? What are the strategy spaces? What conditions define a symmetric pure-strategy Bayesian Nash equilibrium of this game? Solve for such an equilibrium
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