Alliance Problem Set (2.5 pts/each)

1. Firms A and B form an international strategic alliance (ISA). As part of the ISA, Firm A agrees to build a new plant right next to Firm B's primary facility. In return, Firm B promises to buy most of the output of the new plant. Who is at risk, Firm A or Firm B and why? (2 pts)
2. Firms A and Firm B form an international strategic alliance (ISA). As part of the ISA, Firm A promises to provide Firm B access to some new technology and production technique that Firm B will use in its products. In return, Firm B will share some of the profits from its sales with Firm A. Who is at risk, Firm A or Firm B and why? (2 pts)