A company, say Afghan Saffron, is considering entering the Iranian’s market which is dominated by its principal rival, say Iranian Saffron. Clearly, Afghan Exporters decision to enter or not will be judged on the potential profitability of such a move. This, in turn, depends upon the way Iranian will react to such a business move by Afghan Exporters. If Iranian reacts aggressively by launching a big commercial campaign, then an entry by Afghan Saffron Exporters will result to a loss of $2.8 million for Afghan Saffron Exporters and a loss of $2.2 million for Iranian Manufacturers. If, on the other hand, Iranian accommodates Afghan Saffron exporter’s entry, then both Afghan and Iranian will be making profits of $1 million and $1 million, respectively. Finally, if Afghan Exporter does not enter the market at all, then Iranians will be making monopoly profits of $3.5 million”. Requirements: a) What would you do if you were the CEO of Afghan Saffron Exporter and Why, Explain briefly-use any practical approach or model discussed in the class to justify your response? b) If you were an Iranian Saffron Producer, Would you play aggressively or would you accommodate Afghan Exporters entry? c) What about if you were Iranian Saffron Exporters CEO?
A company, say Afghan Saffron, is considering entering the Iranian’s market which is dominated by its principal rival, say Iranian Saffron. Clearly, Afghan Exporters decision to enter or not will be judged on the potential profitability of such a move. This, in turn, depends upon the way Iranian will react to such a business move by Afghan Exporters. If Iranian reacts aggressively by launching a big commercial campaign, then an entry by Afghan Saffron Exporters will result to a loss of $2.8 million for Afghan Saffron Exporters and a loss of $2.2 million for Iranian Manufacturers. If, on the other hand, Iranian accommodates Afghan Saffron exporter’s entry, then both Afghan and Iranian will be making profits of $1 million and $1 million, respectively. Finally, if Afghan Exporter does not enter the market at all, then Iranians will be making monopoly profits of $3.5 million”.
Requirements:
a) What would you do if you were the CEO of Afghan Saffron Exporter and Why, Explain briefly-use any practical approach or model discussed in the class to justify your response?
b) If you were an Iranian Saffron Producer, Would you play aggressively or would you accommodate Afghan Exporters entry?
c) What about if you were Iranian Saffron Exporters CEO?
d) Would you enter the Iranian market or would you not?
e) How
f) How important the timing of the decisions made by the two companies is for the outcome of the game? You can also develop the payoff matrix to discuss the expected outcomes for each player if the game is played once.
g) Game theory can be used very effectively as a tool for decision-making whether in an economical, business or personal setting. Discuss how and why only in the light of the cases study provided in this paper?
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