REC 6 - ECO303.02 Recitation #6 1) BuyRight is a chain of...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ECO303.02 Recitation #6 1) 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? Answer: a. A dominant strategy is one that is optimal regardless of the rival's strategy. b. For both firms, the dominant strategy is to increase advertising. If Acme increases advertising, Buy-Right earns 20 by increasing, 2 by not increasing. Profit is higher for Buy-Right by increasing, regardless of Acme's choice. The
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/14/2010 for the course ECO 303 taught by Professor Yunshanchan during the Fall '08 term at SUNY Stony Brook.

Page1 / 3

REC 6 - ECO303.02 Recitation #6 1) BuyRight is a chain of...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online