Return to the situation in Exercise S7, where Tudor’s low per-unit cost is 6. (a) Write the normal form of this game in terms of z, the probability that Tudor is low price. (b) What is the equilibrium...

Return to the situation in Exercise S7, where Tudor’s low per-unit cost is 6.

(a) Write the normal form of this game in terms of z, the probability that Tudor is low price.

(b) What is the equilibrium when z = 0.1? Is it separating, pooling, or semi separating?

(c) Repeat part (b) for z = 0.2.

(d) Repeat part (b) for z = 0.3.

(e) Compare your answers in parts (b), (c), and (d) of this problem with part (d) of Exercise U5. When Tudor’s low cost is 6 instead of 10, can pooling equilibria be achieved at lower values of z? Or are higher values of z required for pooling equilibria to occur? Explain intuitively why this is the case.