Question 4 Firm 1 can produce either of two goods, A or B; Firm 2 can produce either of two goods, C or D. They decide which goods to produce simultaneously and independently without any communication between each other. Firms' profits depend on whether consumer demand will be high or low or next year. If demand is high, then the payoffs are given by Firm 2 C D Firm 1 A (6, 4) (5, 5) B (5, 2) (4, 3) If demand is low, then the payoffs are Firm 2 C D Firm 1 A (2, 4) (1, 1) B (4, 3) (3, 2) Firm 1 hired a forecaster and therefore it knows whether the demand will be high or low. However, Firm 2 only knows demand will be high with probability q and low with probability 1-q. a) (15 points) For what range of values of q will the following be a Bayesian Nash equilibrium: Firm 1 produces A if demand is high and Firm 1 produces B if demand is low. Firm 2 produces D. b) (10 points) Assume that q=0.5. Find the Bayesian Nash equilibrium in this game.