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A small Canadian firm that has developed valuable new medical products using its unique biotechnology know-how is trying to decide how best to serve the European Union market. Its choices are given below.
The cost of investment in manufacturing facilities will be a major one for the Canadian firm, but it is not outside its reach. If these are the firm's only options, which one would you advise it to choose? Why?
• Manufacture the products at home and let foreign sales agents handle marketing.
• Manufacture the products at home and set up a wholly owned subsidiary in Europe to handle marketing.
• Enter into an alliance with a large European pharmaceutical firm. T he products would be manufactured in Europe by the 50/50 joint venture and marketed by the European firm.
How did your opinions about what should be done differ before you read the commentaries, and after you read them?
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A Plan of Action
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Imagine that the payoffs following choice A by player 1 are (2, 0), those following C by player 2 are (3, 1), those following E by player 1 are (0, 0), and those following F by player 1 are (1, 2). What are the Nash equilibria of this game? Does o..
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