Design to develop the can logo and design
Course:- Business Economics
Reference No.:- EM13891932

Assignment Help
Assignment Help >> Business Economics

RC Cola is considering marketing a new, fruit flavored soft drink. It hires Mark-D Design to develop the can logo and design. RC calculates that a good design raises can sales and is worth $.75 million to them. They agree to pay $.60 million for an acceptable design. Mark-D spends $.45 million on developing the logo and design. The design can be sold elsewhere for only $.15 million.

Ex-ante, what is Mark-D’s expected profit?

Ex-post, what is Mark-D’ expected profit over its next best alternative?

If RC tries to hold-up Mark-D, what is the lowest price they can offer? What is Mark-D’s profit in this case?

If RC anticipates needing can design in the future, will this change its incentive to hold-up Mark-D? Explain.

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
The First National Bank has reserves of $150,000 and demand deposits equal to $1,200,000. The reserve ratio is 10 percent. How much in excess reserves does the bank now have?
A consumer’s income in the current period is y1= 170 and income in the future period is y2 = 150. He pays lump-sum taxes t1 = 20 in the current period and t2 = 7 in the future
Please discuss below at least five economic policy instruments one may use to bring down greenhouse gas emissions and associated negative consequences of environmental and nat
Scarecrow Manufacturing will need to begin paying a licensing fee of $7402 at the end of year 7. Scarecrow will have to pay the licensing fee for 8 years, but the fee will dec
The largest loan that the bank can make on the basis of the new deposit. If the bank chooses to hold reserves of $3,000 on the new deposit, what are the excess reserves on t
Illustrate what the effects would be if real GDP is growing also both the velocity of money also the money stock are constant. Please converse.
A store offers two payment plans. Under the installment plan, you pay twenty percent down and twenty percent of the purchase price in each of the next four years. If you pay t
Government says that firm X must pay $1000 in taxes simply because it is in business of producing a good. What cost curves if any does this tax affect and does MC change if