(3,8) Suppose now that Firm 2 does not know Firm 1's type. The game of incomplete...

  

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(3,8) Suppose now that Firm 2 does not know Firm 1's type. The game of incomplete information is represented below. The prior belief about Firm 1's type is given by Pr[Aggressive] = p. Pr[Passive] =1-p. 0 <p<1. (3,8) 4 Not Aaaressive.v Not Firm Natur Passive. 1 d. ed States) Text Predictions: On Firm Enter Ente Firm Firm Figh Accommodate Figh (1,1) Accommodat (7,3) (5,5) a. List the strategies available to each player. Remember that Firm 1's strategy will be contingent on its type, so it has 4 possible strategies. Firm 2's strategies do not depend on Firm 1's type, so it has 2 strategies. b. Construct a new payoff matrix with Firm 1's strategies listed along rows and Firm 2's strategies along columns and fill in the expected payoffs. (3,7) c. Find all the Bayesian Nash Equilibria (BNE). Specify the condition on prior beliefs, p where necessary. The BNE will be different for p ≤ 1/2 and pz 1¹/2 Check if each of the BNE found in part e) are sequentially rational. P Acces (3,8) Suppose now that Firm 2 does not know Firm 1's type. The game of incomplete information is represented below. The prior belief about Firm 1's type is given by Pr[Aggressive] = p. Pr[Passive] =1-p. 0 <p<1. (3,8) 4 Not Aaaressive.v Not Firm Natur Passive. 1 d. ed States) Text Predictions: On Firm Enter Ente Firm Firm Figh Accommodate Figh (1,1) Accommodat (7,3) (5,5) a. List the strategies available to each player. Remember that Firm 1's strategy will be contingent on its type, so it has 4 possible strategies. Firm 2's strategies do not depend on Firm 1's type, so it has 2 strategies. b. Construct a new payoff matrix with Firm 1's strategies listed along rows and Firm 2's strategies along columns and fill in the expected payoffs. (3,7) c. Find all the Bayesian Nash Equilibria (BNE). Specify the condition on prior beliefs, p where necessary. The BNE will be different for p ≤ 1/2 and pz 1¹/2 Check if each of the BNE found in part e) are sequentially rational. P Acces

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a Firm 1s strategies If aggressive Fight Acc... View the full answer