b) Currently, firm I has a monopoly in a market, from which it earns annual prof
ID: 1156289 • Letter: B
Question
b) Currently, firm I has a monopoly in a market, from which it earns annual profits of S2million, all of which it would lose if it exited the market (so it will not be exiting the market). Firm E is considering entering the market. If it enters it will incur annual non-recoverable fixed costs of $300,000. If E does enter, I can either "accommodate" E, or choose to fight a price war. E could then decide whether to stay in the industry, or to exit. Firm E figures out the payoff matrix for both firms given the various possible sequence of actions and responses (the payoffs in each cell are (E payoff, I payoff) in mllions of dollars/year): Firm E's actions Stay Exit 0.3,2.0 -0.3, 2.0 Accommodate Firm I's actionsPrice-war 0.2, 1.0 (i) Draw the sequential game tree for this situation 5 marks) (ii) Explain why Firm I's dominant strategy is to accommodate, if Firm E enters (5 marks)Explanation / Answer
1. Abstract:
As a developing country, UAE has done remarkably well in last couple of years in case of adopting internet technology.Etisalat Group is one of the world’s leading telecom groups in emerging markets. The internet service providers industry in the United Arab Emirates currently has a significantly medium level of concentrations.In the UAE, Etisalat, and Du have established a monopolized platform in the internet service providing industry, and as such it is important to evaluate the quality of services they provide to their customers. The purpose of this research is to establish the comparability between the internet services provided by Du and Etisalat based on customer satisfaction.
The purpose of this study is to evaluate the quality of services provided by Etisalat and Du based on responses from their customers.
Key words: Information Technology, Internet Service Providers,
Customer Satisfaction, Beneficiaries, Service gainer
2.Introduction:
A new revolution is in the making, similar to the industrial revolution that took place at the turn of the last century.Many economists, management experts and futurists agree that the world has entered the new age of information.The growth of Information technology (IT) industry is perhaps the faster of all that within a span of a decade. There are small and big players in this industry, each one in trying to carve a niche for itself. In the United Arab Emirates, the situation is similar, although there are two specific companies that provide close to 90% of the internet services in the country.
Etisalat Group is one of the world’s leading telecom groups inemerging markets.Headquartered in Abu Dhabi, Etisalat was established four decades ago in the UAE as the country’s first telecommunications service provider.
3. Background and Significance
The influence of technology is to realize that the Internet is just ‘one big service’.In the United Arab Emirates, telecommunications are under the supervision and control of the Telecommunications Regulatory Authority.
However, after February 2006, this monopoly was eliminated. In its place, the telecommunications industry became a duopoly. This was after the establishment of Du, which functioned to provide mobile services, television services, and internet services, across the UAE to the free zones (Kovacs, 2014). Regardless of this fact, the two companies function as independent monopolies mainly because they operate in different areas and they do not have the same consumer base.
However, there is a significant difference between the services provided by Etisalat and Du, and it is necessary that they are highlighted based on the responses of their customers.
4. Research Design and Methods
With regards to the competition existing among different service providers, it is important that they operate and govern their networks with efficiency.As such, services provided by companies could benefit significantly from the maintenance of the quality of service within a given network. Consequently, this allows for the opportunity for additional possibilities with regards to value-added services that would enable providers to expand their target market and differentiate themselves from other providers.
du currently has an overall employee Emiratisation level of 31%, with 41% of hired UAE Nationals in executive positions. The telecom company has an established Emiratisation scheme, Masar, and regularly participates in career fairs across the UAE to capture the attention of young Emiratis.du has been involved in several corporate governance initiatives in the UAE, Middle East and the USA, promoting best practice through workshops, sponsorships and many more initiatives.
Etisalat Group’s mission is to provide a best-in-class total customer experience domestically and internationally, deliver attractive returns to shareholders while investing in the long-term future of the company, and supporting economic development in all the markets we operate in.
5.Conclusion:
The questionnaires will be distributed through
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