Determine the optimal strategy for the situation by representing it as a game and finding the saddle point. State your final answer in the terms of the original question.In an ongoing price war between Burger Haven (locally owned) and MacArches (a chain), both restaurant managers plan to change the price of a hamburger by 10¢. Ifthey both raise their prices, there will be no change in their market shares, but if they both lower their prices, the chain's national advertising will ensure that MacArchesgains 6% of the market. Again because of advertising, if Burger Haven lowers their price and MacArches raises their price, Burger Haven will gain only 5% of the market,but if Burger Haven raises their price and MacArches lowers their price, MacArches will gain 7% of the market. Use this information to decide what the managers shoulddo.MacArchesR%Burger Haven%%What does L represent?L represents lowering the price by 10¢.L represents raising the price by 10¢.What does R represent?R represents lowering the price by 10¢.R represents raising the price by 10¢.The saddle point is thein rowand columnWhat should the managers do?Burger Haven should lower its prices, while MacArches raises its prices.Both restaurants should lower the price.MacArches should lower its prices, while Burger Haven raises its prices.Both restaurants should raise the price.

In this question, we have to find optimal strategy using game theory.…

etermine the optimal strategy for the situation by representing it as a game and finding the saddle point. State your final answer in the terms of the original question. n an ongoing price war between Burger Haven (locally owned) and MacArches (a chain), both restaurant managers plan to change the price of a hamburger by 10¢. If hey both raise their prices, there will be no change in their market shares, but if they both lower their prices, the chain's national advertising will ensure that MacArches ains 6% of the market. Again because of advertising, if Burger Haven lowers their price and MacArches raises their price, Burger Haven will gain only 5% of the market, ut if Burger Haven raises their price and MacArches lowers their price, MacArches will gain 7% of the market. Use this information to decide what the managers should o. MacArches L {( % % Burger Haven % % What does L represent? OL represents lowering the price by 10¢. OL represents raising the price by 10¢. What does R represent? OR represents lowering the price by 10¢. OR represents raising the price by 10¢. The saddle point is the in row and column What should the managers do? O Burger Haven should lower its prices, while MacArches raises its prices. O Both restaurants should lower the price. O MacArches should lower its prices, while Burger Haven raises its prices. Both restaurants should raise the price.

18th Edition

ISBN:9780079039897

Author:Carter

Publisher:Carter

Chapter3: Linear And Nonlinear Functions

Section3.7: Piecewise And Step Functions

Problem 30PPS