Cournot Competition with Two-Sided Incomplete Information Consider the Cournot game of incomplete information of Sect. 6.2.2 and assume that also firm 1 can have high costs or low costs, say ch with...

Cournot Competition with Two-Sided Incomplete Information

Consider the Cournot game of incomplete information of Sect. 6.2.2 and assume that also firm 1 can have high costs or low costs, say ch with probability  and cl with probability 1 . Set up the associated game and compute the (four) reaction functions. (Assume that the parameters of the game are such that the Nash equilibrium quantities are positive and the relevant parts of the reaction functions can be found by differentiating the payoff functions (i.e., no corner solutions).) How can the Nash equilibrium be computed? (You do not actually have to compute it explicitly.)