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Question 3 BHP and the Chinese Steel Association are negotiating over sales of iron ore by BHP to Chinese steel producers. Iron ore can be
Question 3 BHP and the Chinese Steel Association are negotiating over sales of iron ore by BHP to Chinese steel producers. Iron ore can be sold by long-term contract, or on a spot market. BHP must makes choices about whether to seek to sell a 'Small' or 'Large' proportion of its iron ore on the 'spot' market for iron ore, and about whether to seek a 'Low' or 'High price for the iron ore it sells by long-term contract. The Chinese Steel Association must decide whether to 'Block' or Not Block' BHP from selling its iron ore on the spot market. Payoffs from this game involving BHP and the Chinese Steel Association are shown in the game table below: Chinese Steel Association Block Not block BHP Sell on spot Price for long- market term contract sales Small Low $70billion, $80billion, $80billion $40billion Small High $60billion, $40billion, $30billion $60billion Large Low $60billion, $120billion. $30billion $40billion Large High $40billion, $60billion. $20billion $10billion Suppose BHP and the Chinese Steel Association make their choices simultaneously
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