Originally posted by ares834
So what? The Mandarin was nothing more than a cover for Killian's schemes. Why would it matter if the Mandarin appeared weak?
Mandarin had to appear to be a highly competent and dangerous terrorist figure at all times in order for his scheme to work. Considering at this time, Iron Man was a bonafide superhero in leagues with legendary super soldiers, gamma monsters, and a god, Mandarin taking Stark out in his own home only further made him that much more legitimate of a threat. Plus Tony was going to go after him anyway.
Logically, it made a lot of sense for the Mandarin to accept the challenge than to ignore and wait for Stark to strike first.