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The whole question information is in the picture. The question is to figure out Bayesian Nash equilibrium of this game. 6. Consider the Cournot duopoly

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The whole question information is in the picture.

The question is to figure out Bayesian Nash equilibrium of this game.

image text in transcribed
6. Consider the Cournot duopoly game with incomplete information. First Nature chooses a number x, which is equally likely to be 8 and 4. This number represents whether demand is high (x = 8) or low (x = 4). Firm 1 observes x, because this firm has performed market research and knows the demand curve. Firm 2 does not observe x. Then the two firms simultaneously select quantities, q1 and q2, and the market price is determined by p = 2 - 91 -92. Assume that the firms produce at zero cost. Thus, the payoff of firm 1 is (x - 91 - 92)91, and the payoff of firm 2 is (x - q1 - q2) 92. (a) Note that there are two types of firm 1, the high type (observing x = 8) and the low type (observing x = 4). Let of and of denote the quantity choices of the high and low types of firm 1. Calculate the players' best-response functions

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