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 Olde Yogurt Factory has reduced the price of its popular Mmmm Sundae from $2.25 to $1.75. As a result, the firm's daily sales of these sundaes have increased from 1,500 pe
A stock had the following trades during a particular period. What was the money flow for the stock? (Leave no cells blank - be certain to enter "0" wherever required. Input al
Consider the market for taxi service in Washington, DC. Use demand-supply analysis to explain the effects (i.e., increase or decrease) on the equilibrium price and quantity fr
Assume that equilibrium GDP (Y) is 5,000. Consumption (C) is given by the equation C = 500 + 0.6(Y - T). Taxes (T) are equal to 600. Government spending is equal to 1,000. I
In which direction will the scale effect change the firm’s employment of labor? c. Can you say conclusively whether the firm will use more or less labor? More or less capital?
Demand for microprocessors is given by P=35 - 5Q where Qis quantity of microchips in millions. The typical firm’s total cost of producing a chip is Ci=5qi where qi is the outp
Grear Tire Company has produced a new tire with an estimated mean lifetime mileage of 36,500 miles. Management also believes that the standard deviation is 5000 miles and is n
AZ approved 98 patients for organ transplants, but those patients have been told they can no longer receive transplants because of budget cuts. The state is facing a $1.5 bill