Answered: Your pharmaceutical firm is seeking to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Your pharmaceutical firm is seeking to open up new international markets by partnering with various local distributors. The different distributors within a country are stronger with different market segments (hospitals, retail pharmacies, etc.) but also have substantial overlap.

In Egypt, you calculate that the annual value created by one distributor is $330 million per year, but would be $440 million if two distributors carried your product line.

Assuming a nonstrategic view of bargaining, you would expect to capture

million of this deal. (Hint: The two distributors are independent of each other; therefore, you conduct separate negotiations with each.)

Argentina also has two distributors that add value equivalent to the value added by the two distributors in Egypt, but both are run by the government.

Assuming a nonstrategic view of bargaining, you would expect to capture

million of this deal.

In Argentina, if you do not reach an agreement with the government distributors, you can set up a less efficient Internet-based distribution system that would generate $110 million in value to you.

Assuming a nonstrategic view of bargaining, you would expect to capture

million of this deal.

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