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Consider a duopoly with a Cournot competition. The demand of the market is Q=2-p. Both firm...

  1. Consider a duopoly with a Cournot competition. The demand of the market is Q=2-p. Both firm 1 and firm 2’s marginal costs can take two values. For firm 1 it can be MC=5/4 with probability 1/3 and MC=3/4 with probability 2/3. For firm 2 it can be MC=5/4 with probability 2/3 and MC=3/4 with probability 1/3. Each firm knows its own MC but does not know the MC of the other firm. (But the probabilities are known to everyone.) What will be he Bayesian equilibrium of the game?
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Answer #1

AS THIS IS A CASE OF COURNOT COMPETITION WITH A DUOPOLY . WE ARE GIVEN WITH THE DEMAND AND MARGINAL COST OF BOTH THE FIRMS AS WELL AS PROBABLITY TO BE CONSIDERED.

I HAVE GIVE THE FORMULA AND ANSWER

HOPE IT HELPS..

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