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Cournot Revisited: Consider the Cournot duopoly model in which two firms, 1 and 2, simultaneously choose the quantities they supply, q1 and q2. The price
Cournot Revisited: Consider the Cournot duopoly model in which two firms, 1 and 2, simultaneously choose the quantities they supply, q1 and q2. The price each will face is determined by the market demand function p(q1, q2) = a b(q1 + q2). Each firm has a probability of having a marginal unit cost of cL and a probability 1 of having a marginal unit cost of cH . These probabilities are common knowledge, but the true type is revealed only to each firm individually. Solve for the Bayesian Nash equilibrium.
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