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Bakery 1 and Bakery 2 are playing a game in which they are deciding how many sourdough breads to produce. Let q1 be the number
Bakery 1 and Bakery 2 are playing a game in which they are deciding how many sourdough breads to produce. Let q1 be the number of loaves Bakery 1 produces and let q2 be the number of loaves Bakery 2 produces. Both bakeries choose how much to produce simultaneously and without communicating with the other bakery. Bakery 1's prot in this game is equal to 7r] = (10 - ql - q2)q1 Bakery 2's prot in this game is equal to \"2 = (14 91 1992 For the rest of this question, assume that instead of choosing how many sourdough breads to produce, the two bakeries choose how much to charge for a loaf of bread. Let p1 be the price Bakery 1 charges and let p2 be the price Bakery 2 charges. The bakeries use the same recipe for the sourdough bread, so we can assume that the bread from Bakery 1 and the bread from Bakery 2 are perfect substitutes. Therefore, the behavior of the consumers in the market is entirely driven by the prices: All the consumers purchase their bread from the bakery that sells it at a cheaper price. If both bakeries charge the same price, then assume that half of the consumers buy from Bakery 1 and the other half buy from Bakery 2
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