BuyRight Is a Chain of Grocery Stores Operating in Small

question 48

Essay

BuyRight is a chain of grocery stores operating in small cities throughout the southwestern United States. BuyRight's major competition comes from another chain, Acme Food Stores. Both firms are currently contemplating their advertising strategy for the region. The possible outcomes are illustrated by the payoff matrix below.
Entries in the payoff matrix are profits. BuyRight's profit is before the comma, Acme's is after the comma.
a. Describe what is meant by a dominant strategy.
b. Given the payoff matrix above, does each firm have a dominant strategy?
c. Under what circumstances would there be no dominant strategy for one or both firms?

---

Definitions:

Unit Product Cost

The total cost assigned to a single unit of product, including direct materials, direct labor, and allocated overhead.

Absorption Costing

An approach in financial accounting that wraps all expenses incurred in manufacturing including direct materials, direct labor, and all overhead (variable and fixed), into the product's cost.

Net Operating Income

The total revenue of a business minus its operating expenses, excluding taxes and interest.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, labor, and both variable and fixed overhead - in the cost of a product.