Homework Help is Here – Start Your Trial Now!
Business
Economics
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¢. 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 advertising will ensure that MacArches gains 4% of the market. Again because of advertising, if Burger Haven lowers their price and MacArches raises their price, Burger Haven will gain only 2% of the market, but if Burger Haven raises their price and MacArches lowers their price, MacArches will gain 5% of the market. Use this information to decide what the managers should do. MacArches R

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¢. 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 advertising will ensure that MacArches gains 4% of the market. Again because of advertising, if Burger Haven lowers their price and MacArches raises their price, Burger Haven will gain only 2% of the market, but if Burger Haven raises their price and MacArches lowers their price, MacArches will gain 5% of the market. Use this information to decide what the managers should do. MacArches R

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
See similar textbooks
icon
Related questions
Question

t23 all one 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¢. 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 advertising will ensure that MacArches gains 4% of the market. Again because of advertising, if Burger Haven lowers their price and MacArches raises their price, Burger Haven will gain only 2% of the market, but if Burger Haven raises their price and MacArches lowers their price, MacArches will gain 5% of the market. Use this information to decide what the managers should do. MacArches R % % Burger Haven What does L represent? O L represents lowering the price by 10¢. O L represents raising the price by 10¢. What does R represent? R 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 Both restaurants should raise the price. Both restaurants should lower the price. Burger Haven should lower its prices, while MacArches raises its prices. MacArches should lower its prices, while Burger Haven raises its prices. O O
Transcribed Image Text: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¢. 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 advertising will ensure that MacArches gains 4% of the market. Again because of advertising, if Burger Haven lowers their price and MacArches raises their price, Burger Haven will gain only 2% of the market, but if Burger Haven raises their price and MacArches lowers their price, MacArches will gain 5% of the market. Use this information to decide what the managers should do. MacArches R % % Burger Haven What does L represent? O L represents lowering the price by 10¢. O L represents raising the price by 10¢. What does R represent? R 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 Both restaurants should raise the price. Both restaurants should lower the price. Burger Haven should lower its prices, while MacArches raises its prices. MacArches should lower its prices, while Burger Haven raises its prices. O O
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¢. 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 advertising will ensure that MacArches gains 4% of the market. Again because of advertising, if Burger Haven lowers their price and MacArches raises their price, Burger Haven will gain only 2% of the market, but if Burger Haven raises their price and MacArches lowers their price, MacArches will gain 5% of the market. Use this information to decide what the managers should do. MacArches R % % Burger Haven % % What does L represent? L represents lowering the price by 10¢. O L represents raising the price by 10¢. What does R represent? R 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? Both restaurants should raise the price. Both restaurants should lower the price. Burger Haven should lower its prices, while MacArches raises its prices.
Transcribed Image Text: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¢. 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 advertising will ensure that MacArches gains 4% of the market. Again because of advertising, if Burger Haven lowers their price and MacArches raises their price, Burger Haven will gain only 2% of the market, but if Burger Haven raises their price and MacArches lowers their price, MacArches will gain 5% of the market. Use this information to decide what the managers should do. MacArches R % % Burger Haven % % What does L represent? L represents lowering the price by 10¢. O L represents raising the price by 10¢. What does R represent? R 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? Both restaurants should raise the price. Both restaurants should lower the price. Burger Haven should lower its prices, while MacArches raises its prices.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 1 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS