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 gains4%of the market. Again because of advertising, if Burger Haven lowers their price and MacArches raises their price, Burger Haven will gain only2%of the market, but if Burger Haven raises their price and MacArches lowers their price, MacArches will gain8%of the market. Use this information to decide what the managers should do.

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Sep 13, 2020

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