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The town of Perkasie, Pennsylvania, has two diners: Emil's Diner and Bobby Ray's Diner. Both sell only chicken pies. Everyone who would consider eating at
The town of Perkasie, Pennsylvania, has two diners: Emil's Diner and Bobby Ray's Diner. Both sell only chicken pies. Everyone who would consider eating at the diners is aware that they sell the same chicken pies, and knows the prices they charge (PE: PBR). At precisely 5 P.M., each diner (simultaneously) sets its price of chicken pie for that evening. The market demand function for chicken pie is Q = 360 - 30p, where p is the lower of the two diners' prices. If there is a lower-priced diner, then people eat chicken pie at only that diner and the diner sells 360 - 30p chicken pies. If the two diners post the same price, then each sells to one-half of the market: 0.5(360 - 30p). Suppose that prices can be quoted in dollar units only ($0, 4, 6, or 8). Each diner's marginal cost is $4 and fixed cost is $0 If Emil's Diner charges 50 and Bobby Ray's Diner charges $6, then Emil's profit is $and Bobby Ray's profit is s (Enter numeric responses using integers.) In a second example, if Emil's Diner charges $4 and Bobby Ray's Diner charges $6, then Emil's profit is $[ and Bobby Ray's profit is $ Next, if Emil's Diner charges $6 and Bobby Ray's Diner charges $6, then Emil's profit is $ and Bobby Ray's profit is $ If Emil's Diner charges $8 and Bobby Ray's Diner charges $6, then Emil's profit is $and Bobby Ray's profit is s Profits for all price combinations are illustrated in the payoff matrix below
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