Consider the following Cournot duopoly. Both firms produce a homogenous good. The demand function is Q = 100 - 2P, where Q is the total quantity produced. Firm 1's cost function is TC(q,) =591 + 1. Firm 2's marginal cost of production is c = 6 with probability 0.5 and = 3 with probability 0.5. Firm 2 knows its own cost function and firm 1's cost function. Firm 1 knows its own cost function and the probability distribution of firm 2's marginal cost. How much does firm 2 produce in a Bayesian Nash Equilibrium? O 175/6 if the marginal cost is high and 193/6 if the marginal cost is low O 86/3 if the marginal cost is high and 98/6 if the marginal cost is low O 92/3 O 98/6

Consider the following Cournot duopoly. Both firms produce a homogenous good. The demand function is Q = 100 - 2P, where Q is the total quantity produced. Firm 1's cost function is TC(q,) =591 + 1. Firm 2's marginal cost of production is c = 6 with probability 0.5 and = 3 with probability 0.5. Firm 2 knows its own cost function and firm 1's cost function. Firm 1 knows its own cost function and the probability distribution of firm 2's marginal cost. How much does firm 2 produce in a Bayesian Nash Equilibrium? O 175/6 if the marginal cost is high and 193/6 if the marginal cost is low O 86/3 if the marginal cost is high and 98/6 if the marginal cost is low O 92/3 O 98/6

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

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Question 22 Consider the following Cournot duopoly. Both firms produce a homogenous good. The demand function is Q = 100-P, where is the total quantity produced. Firm 1's marginal cost is MC1 = 91. Firm 2's marginal cost of production is MCH = 4 with probability 0.25 and MC₂ = 2 with probability 0.75. Firm 2 knows its own cost function and firm 1's cost function. Firm 1 knows its own cost function and the probability distribution of firm 2's marginal cost. What is the market clearing price? 41/2 215/4 167/4 if the cost is high and 155/4 if the cost is low 167/4 if the cost is high and 163/4 if the cost is low