Public finance

Question 3. Consider two companies who are deciding upon entering the market. If a company does not enter the market it earns zero profits or costs. If one company enters the market while the other company does not enter the market, the company that enters the market earns YLOW worth of revenue. If both companies enter the market then each company ears YHIGH worth of revenue. Assume 1> YHIGH-YLOWGO. Each firm's cost function is determined by random events. One firm's costs are not correlated with another firm's costs. The individual firm's costs are distributed uniformly on a [0,1] interval. When deciding upon market entry, each firm knows their own costs. When deciding upon market entry, each firm knows the probability distribution of another firm's cost but does not know the actual realized value of another firm's costs. a) Assume both firms decide independently upon market entry. Construct an expected profit function for the scenario described bellow Carefully define every component of that function