There are two bakers, Anderson and Carlson. Anderson's pitas taste just like Carlson'snobody can tell the difference. Anderson has constant marginal costs of R1 per pita. Carlson has constant marginal costs of R2 per pita. Fixed costs are zero for both of them. The inverse demand function for pita in town is P(QT) = 6 0.01QT, where QT is the total number of pitas sold by both Anderson and Carlson per day.

1. Write the profit function for each firm in terms of and . Find each firm's best-response rule. [6]

2. Find the Nash equilibrium price, quantity, and profit for each firm. [3]