Annual demand curve for particular product

Assignment Help Operation Management
Reference no: EM132234421

Disney owns the rights to market products (e.g., children’s clothing) that are based on their much beloved children characters (e.g., Mickey Mouse). The company prefers not to get involved in the production and marketing details of these products since there is a large pool of firms that can perform such standardized, low-margin activities. The purpose of this problem is to explore the implications contracting between a monopolist of intellectual property and firm that is awarded a franchise to produce goods based on that intellectual property.

Suppose that the annual demand curve for a particular product using Disney characters (children’s pajamas) is known to be given by the equation, Q = 100 – P, where Q is units per year and P is the price per unit. A typical contractor can produce the product with a marginal cost equal to $10 per unit (independent of the volume of output produced) and an avoidable fixed cost of $1,000 per year. There are many contractors with this cost structure. All of them agree about what demand is going to be and know the cost structure of each other. The company licenses contractors by imposing an annual licensing fee L that does not depend on the amount of output the contractor produces.

a. Suppose that Disney solicits bids for this product, under the rule that the contractor with the highest bid L wins the contract. The winner gets the exclusive rights to produce and sell the product. What licensing fee would Disney expect to get?

b. Suppose, instead, that Disney considered awarding contracts to two contractors who would compete with each other. (You might, to be concrete, imagine that the competition between contractors would be Cournot quantity competition, but this assumption is not crucial to the story). As before, the set of potential contractors have identical marginal and fixed costs. Is it likely that Disney will do better under this arrangement than under the arrangement in part (a)?

Reference no: EM132234421

What is difference between internal and external customers

Describe four skills that will help you serve customers effectively.  What are the steps you should take to solve a customer service problem? Describe three strategies you can

Recommendation of a low-labor-cost country based on inputs

Outsourcing, especially to low labor-cost countries, has grown substantially. Be sure to address the following in your paper: Analyze the trade-offs between inputs for the pro

Identify the ethical issue and the ethical dilemma

Identify the ethical issue, the ethical dilemma and the traditional theories that will be used to suggest potential resolution of the dilemma. Unique Ethical Issue: The Busine

Factors influencing internal pay structures

Importance of Internal Alignment. Why is internal alignment an important policy in a strategic perspective of compensation? How is internal alignment supported or not supporte

Discuss the pros and cons of this strategy

What are some things IKEA is doing well to reach customers in different markets? What else could it be doing? Discuss the pros and cons of this strategy? IKEA expanding in pla

What implications do you see for leadership

Examine Exhibit 7 of the case. What implications do you see for leadership and for strategy development given the experience of the senior management team? This is from a Harv

What will be the new confidence interval

Suppose that the confidence interval for the population mean of summer income of undergraduate fulltime students using a sample size of 50, confidence level of 0.9 is [7000,10

Illustrate what security breaches may cause harm

Illustrate what security breaches may cause harm to an organization or its clients. Explain why is it important to ensure a proper level of security. Illustrate what tools a

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd