Answered: Your pharmaceutical firm is seeking to…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter16: Bargaining

Section: Chapter Questions

Problem 16.5IP

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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 $120 million per year, but would be $160 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 $40 million in value to you.

Assuming a nonstrategic view of bargaining, you would expect to capture $__________ million of this deal.

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