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solve the following question Consider a Cournot duopoly operating in a market with inverse demand P(Q) = a - Q, where Q = q1 +

solve the following question

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Consider a Cournot duopoly operating in a market with inverse demand P(Q) = a - Q, where Q = q1 + 92 is the aggregate quantity on the market. Both firms have total costs Ci(qi) = cqi, so the marginal costs for the firms are identical. Consider that demand is uncertain. It is high a = an with probability 0 and low a = an with probability 1 - 0. Furthermore , information is asymmetric: firm 1 knows whether demand is high or low but firm 2 does not. All of this is common knowledge. The firms choose quantity simultaneously. (a) Set up the situation as a Bayesian game. (5 Points) (b) What are the strtaegies of the two firms? (5 Points) (c) What are the assumptions on an , OH , 0 and c such that all equilibrium quantities are positive? (5 Points) (d) What is the Bayesian Nash equilibrium of this game? (10 Points)

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