Reference no: EM132414071

Background:

ELX Labs, a multinational pharmaceutical corporation, has been an industry leader for more than a decade, having been first to market for a number of important, cutting-edge drugs. With soaring profits and the respect of competitors and shareholders alike, ELX Labs has had a good run. But darker clouds are ahead, and the company will have to make some difficult decisions to keep ELX Labs profitable. ELX Labs faces challenges from inside and outside the company that will require strong management and smart application of game theory. The company has had a lucrative patent on a cholesterol-lowering drug called Minichol. Minichol has been the highest-selling drug in this market for over a decade. However, GN-Tech Drugs, a rival company, is also currently producing a biosimilar drug that will challenge Minichol's market dominance. A biosimilar drug is a class of drug with a composition and results similar to a name-brand drug.

Since GN-Tech's pricing of the new biosimilar drug poses the biggest threat to ELX Labs' position, the team wants to get right to work on figuring out two critical questions: Will GN-Tech price its drug high or low? And what will ELX Labs' response be?

However, there is another issue with one of their biggest rivals in another drug market that has the potential to hurt ELX Labs' status and impact future profits. The company has been running a repeated game with this rival, and needs to figure out the strategy for them going forward. This is relayed this to the team, but they're anxious to get going on the pricing issue and don't understand the priorities. Alyssia, one of the most trusted colleagues, asks, "What is the rationale for dealing with any other issues now when we know that GN-Tech poses the greatest immediate threat to our highest-selling drug?"

QUESTION:

Using your knowledge of game theory and the given context, which of the following would be the best response to Alyssia's question?

a. "All problems pose equal threats. We need to address problems in the order in which they present themselves, and these problems arose before our issue with GN-Tech."

b. "Whatever decision we make with regard to GN-Tech's pricing will depend on our credibility. GN-Tech has to know we can commit to whatever we say we will do, which means we have to clear up any potential or perceived problems."

c. "We are an industry leader that must always be feared. If we have any problems that our competitors know about, they will lose respect for us, which will result in a weakened market position