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Background
Liquefied Petroleum Gas (LPG) has been a deregulated sector in Pakistan for almost a decade.
The primary objective of this price deregulation by the government was to bring more
investment in the oil and gas sector of Pakistan. Local production in the country is less than the
demand of this product. According to a rough past estimate, local production of LPG in the
country is 1600 metric ton and its demand is around 3000 metric ton per day. Different LPG
companies that were licensed by Oil & Gas Regulatory Authority (OGRA) had to manage the
product demand of the market mostly through de‐marketing activity and import of LPG (in few

cases through illegal channels from Iran). This massive gap in the supply and demand of the
product also created black marketing and import of product without paying taxes on the import
and without the prior permission of OGRA. Price trend in the market over the years is that this
product’s price increases in winter due to extra demand and decreases in summer due to
decrease in the demand. LPG initially was thought to be a pro‐poor fuel but it was not the actual
case in the market because its prices remained out of the reach for a poor person during winter
seasons.
Real time scenario
In a routine price cartel situation just before the winter season, managers of the different LPG
licensed companies were sitting together in a meeting for deciding a mutually agreed price with
extra and unchecked profit during the upcoming winter season. Most of the managers were
keen to have a constant increase in the price during winter with their mutual consensus but one
of the managers, Mr. Ali suggested that this constant increase in the fuel price will increase the
suffering of common and poor people. All the other stake holders heavily criticized Mr. Ali as he
was suggesting a cut on the profit for the interest of society. Some of the senior managers in
that meeting told Mr. Ali that he had no right to think for these ethical considerations in
business as he is representing his company as an employee and that there is no such law to
regulate the price of the product. Mr. Ali’s point of view was that he was also representing the
same interest of his company for increasing the profit but he said that he is also seriously
concerned about the low purchasing power of this fuel of the common person and that he will
remain firm on this argument. This initiated a new dimension of brainstorming for social
responsibility and ethical consideration in that business meeting. Now on one side there was
short term strategy to earn high profit and on the other side, there was a long term strategy of
business growth with ethical consideration.
Requirement
Considering the above mentioned scenario, answer the following questions based on the
knowledge that you have acquired from this course so far.

1: In your point of view, what may be the possible reason of prisoner’s dilemma in this
situation? How will the ethical consideration help this business sector as a long term growth
strategy? (10 Marks)
2: How can Mr. Ali create the spirit of moral reasoning in this interest group? Discuss with logical
points. (10 Marks)

Due date:2 May 2013

Marks=20
Note: Answer should be to the point.
Copied material will be marked as zero.

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Some ethical issues are extremely easy to understand: don’t steal, treat others with respect, and always put down the toilet seat for your lady friends. However, when it comes to the market, the concept of what is right and wrong is a bit blurrier. Of course you can’t exploit children for a lbaor force, but  Is it a business’s right to price however they want? After all, if the number is too high or the marketing too egregious, then consumers won’t buy right?

Well, not exactly. Over the years, governments have put laws on the books for the most heinous of fraudulent pricing strategies, but even then some tactics are considered quite unethical, and you may be committing these missteps without even knowing. We touched a bit on the ethics of natural disaster price optimization in a previous post, but in order to fully understand the scopes of pricing ethics let’s take a look at a brief overview before diving into five main concepts you should stay far away from in your business.

Pricing: More ethics than legality

There is a general consensus that marketing strategies must not infringe on values like honesty, transparency, and autonomy. As such, the main crux of pricing ethics concerns the establishment of a balance of power (through information) between the producer and the consumer. In a completely free market, producers often have the upper hand because they are in control of their products and processes. This potentially lead to unethical practices (using cheap or harmful materials, lying about benefits, etc.), which are deemed harmful for society as a whole.

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Interestingly enough though, even with this possibility only a handful of pricing practices are regulated by the government, mainly because you’re not really sure someone had broken a pricing law until you see results. For example, while predatory pricing, aka pricing extremely low to drive competitors out the market, is illegal, it’s difficult to prove that the price decreases had such an intention and were not simply the result of competitor based pricing. It’s like telling a child that he can have a cookie only if he finishes his vegetables, but with no way to discern if the kid ate the peas or if they were slipped to the dog. Essentially, most laws blindly attempt to curb motivations for doing things, rather than results.

As a result, pricing ethics and legality sit in a grey area, constantly ebbing and flowing between right and wrong. To better protect you and your business, here are some of the most common pricing practices that sit on a razor’s edge of ethics and legality.

1. Price fixing: Collusion at its worse

Price fixing involves the an agreement between a group of people on the same side of a market to buy or sell a good or service at a fixed price. Typically, competition between these participants for consumers drives down prices for goods. Yet, imagine a world where every ice cream shop in America vowed that all single scoops were now $15. Consumers would lost out, because we’d find alternatives or shell out an exorbitant amount of cash, as we couldn’t go to another neighborhood joint to battle the high prices/low quality offering of another.

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The potential blow to consumers is why horizontal price fixing is illegal, which means corporations on the same level of the supply chain cannot agree on a target, maximum, or minimum price (among other things). This form of fraud can be prosecuted under the Sherman Anti-Trust Act. The Supreme Court did rule, however, that vertical price fixing is allowed. For example, wholesale companies can limit how much retailers charge for clothes.

The bottom line: Look at your competitors to understand the market, but don’t get in a room with them and try to take advantage of consumers. Check out more about competitor based pricing.

2. Bid rigging: Favoritism

This one’s more for the proposal crows, but bid rigging involves promising a commercial contract to one group, even though you make it look like multiple parties had the opportunity to submit a bid. Not only is this a moral no no, but it’s also one of the few the government follows up on, especially within their own ranks, because of the number of bids and contracts the government deals with on a yearly bases. This practice hurts consumers considerably, because the best producer doesn’t receive the work necessarily.

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There are many variations of this offense, and all include some pre-determined agreements between corporations involved in securing a contract. Considered a form of collusion, big rigging is illegal under the Sherman Act, our government's rockstar market regulator.

The bottom line: Even if “you know a guy” keep the bidding process honest on both sides. Everyone will end up better off.

gud idea 

The Prisoner’s Dilemma

The Prisoner’s Dilemma is a classic example of games theory, an area of mathematics whose foundations were laid down by John Nash.

The Prisoner's Dilemma shows that, in certain circumstances, if the members of a group trust each other, they can choose a course of action that will bring them the best possible outcome for the group as a whole. But without trust each individual will aim for his or her best personal outcome - which can lead to the worst possible outcome for all.

In the Prisoner's Dilemma two players act as prisoners who have been jointly charged of a crime (which they did commit) but questioned separately. The police only have enough evidence to be sure of a conviction for a minor offence, but not enough for the more serious crime.

The prisoners made a pact that if they were caught they would not confess or turn witness on each other. If both prisoners hold true to their word they will only be convicted of the lesser offence. But the dilemma occurs when the police offer each prisoner a reduced prison term if they confess to the serious offence and give evidence against the other prisoner.

Moral Reasoning

Moral reasoning is individual or collective practical reasoning about what, morally, one ought to do. Philosophical examination of moral reasoning faces both distinctive puzzles — about how we recognize moral considerations and cope with conflicts among them and about how they move us to act — and distinctive opportunities for gleaning insight about what we ought to do from how we reason about what we ought to do.

koi to solution upload kr de........

Tariq bhai  kya hmy just moral reasoning or Prisoner’s Dilemma ko define krna he?

yaaaaaaaaaaaar plz upload kr dooo koi idea tention khatam hoooooooooooooooooooooooooooooooooooooooooooo???? 

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