Consider a duopoly game where 2 firms compete in quantities to serve an inverse demand p=99-3Q, where Q=q1+q2. Firm 1 is an established firm with state-of-the-art technology and marginal cost equal to 0. This is common knowledge. Firm 2 is a new entrant and its marginal cost, denoted c, is its private information. It is known however by the incumbent that c can take on two values: either c=0, which occurs with probability p=0.4, or c=25, which happens with the remaining probability. How much would firm 1 produce in Bayes-Nash equilibrium? [Report your answer with two decimals.]
