1. Business
  2. Economics
  3. 2004 suppose that two firms 1 and 2 compete in...

Question: 2004 suppose that two firms 1 and 2 compete in...

Question details

2004 Suppose that two firms, 1 and 2, compete in a marketwith market demand being P-A-Q.where O is total output of the two firms, and A is the realization of a random variable 10 with probability 8 with probability 1-a Both firms have marginal cost that is equal to 0. Each rm simutanoously chooses its own outpot to maximize profit. Before production strts bowever, the realized value of A is privately learned by firm 1, bus this value remains unknown to fim 2. The game is common know ledge. Write down each firms, optimization oblet i) Derive the firms reaction functions Bi) Find the Bayesian Nash Equilibeium(BNE) this game
Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution