Determine the optimal strategy for the Situation by representing it as a game an

Question

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 pIan to change the price of a hamburger by 10. If they both raise their prices, there will be no change in their market shares, but if they both lower their prices, the chain's national adverting will ensure that MacArches gains 5% of the market Again because of advertising, if Burger Haven towers their price and MacArches raises their price, Burger Haven will gain only 4% of the market, but if Burger Haven raises their price and MacArches towers their price, MacArches will gain 6% of the market Use this information to decide what the managers should do What does L represent? L represents lowering the price by 10

Explanation / Answer

L represents lowering the price by 10Euro.

R represents raising the price by 10 Euro.

a saddle point is a point in the domain of a function that is a stationarypoint but not a local extremum.

So Saddle point is both raising their prices

Both should raise their prices as this will keep the market share same for both the restaurants.

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