Introduce the new product under the given circumstances

Assignment Help Business Economics
Reference no: EM13984089

Your firm must decide whether or not to introduce a new product.

If you do so, then your rival may clone it and start producing a product that is very similar to yours.

The one-time cost of developing the product for you is $100 million,   the one-time cost of cloning for your rival is $40 million.

If your rival copies your product, the present value of the stream of profits each of the two firms receives (except for any fixed costs) is $60 million.

If you introduce the product but the rival doesn't copy it, the present value of the stream of profits you will receive is $150 million, while your rival gets nothing.

If you do not introduce the new product, then neither you nor your rival earn any profit.

a. Present this game in extensive form (a tree). IMPORTANT

b. If you introduce the new product, what are the chances your rival will clone it? Explain.

c. Should you develop and introduce the new product under the given circumstances? Explain.

d. Suppose you can buy a patent granting you exclusive rights for this product for its entire lifecycle. What is the value of such a patent to you? (In other words, up to what amount are you willing to pay for such a patent?)

e. If you had to make an argument convincing the government that you should be granted such a patent or any other form of intellectual property protection, what argument would you make?

Reference no: EM13984089

Questions Cloud

Bundling is more profitable than traditional pricing : When a firm tries to maximize profit by segmenting the market into two groups and charging each group a different price, which group should be facing a lower price? Bundling is more profitable than traditional pricing ...
Treasury securities-maturity value on the maturity date : Current annualized yields on 1 year US treasury securities are only .28%....while current annualized yields on 2year US treasury securities are .69% (note you may assume that both 1 and 2year securities in this example are “0” coupon securities with ..
What is yield curve-what is term structure of interest rates : What is a yield curve? What is a term structure of interest rates? How does yield curve and term structure differ? What do you learn from each shape of the yield curve and how can yield curve and term structure help you make lending and borrowing dec..
What is the winning position on this issue : Two political candidates are vying for town mayor and the key issue is how much to spend on the annual Fourth of July fireworks. Among the 100 voters, 40 want to spend $30,000, 30 want to spend $10,000, and 30 want to spend nothing at all. What is th..
Introduce the new product under the given circumstances : Your firm must decide whether or not to introduce a new product. If you do so, then your rival may clone it and start producing a product that is very similar to yours. The one-time cost of developing the product for you is $100 million,   the one-ti..
What is the present value of this stream of payments : Suppose the interest rate is 5% and that you are to receive three annual payments of $10,000, with the first payment one year from now, the second payment two years from now, and the third payment three years from now. What is the present value of th..
Simple economy that produces two goods : Consider a simple economy that produces two goods: apples and oranges. The following table shows the prices and quantities of the goods over a three-year period. Year Apples Oranges Price Quantity Price Quantity (Dollars per apple) (Number of apples)..
About the investment project : A company has an investment project that will cost $2 million today and yield a payoff of $3 million in 5 years. If the interest rate is 9%, should the firm undertake the project?

Reviews

Write a Review

 

Business Economics Questions & Answers

  Annual cost of production-what is profit maximizing price

Dylan Co. sells hammers to US retailers. The annual demand for its hammers is d(p)=25,000 × (30 −p) and its annual cost of production is TC(q)= 400,000 + 20q.Its factory has a capacity of 150,000 units. What is the profit maximizing price for Dylan C..

  Find the average time per unit required to produce

Find the average time per unit required to produce the first 15 units, if the slope parameter of the learning rate is 91% and the first unit takes 400 hours.

  Leading the charge for fiscal coordination

Why is Germany now leading the charge for fiscal coordination? How has Germany’s reliance on the Eurozone countries contributed to its own economic slowdown?

  Accounts receivable payments

A company's cash sales for the month are $200,000 and its accounts receivable payments for the month are $100,000. What is its total incoming cash flow.

  Suppose the fed conducts an open market sale by selling

Suppose the Fed conducts an open market sale by selling $10 million in Treasury bonds to Acme Bank. Sketch out the balance sheet changes that will occur as Acme restores its required reserves (10% of deposits) by reducing its loans. The initial balan..

  Calculate accounting-economic profit for gomezs pottery firm

Gomez runs a small pottery firm. He hires one part-time worker at $12,000 per year, pays annual rent of $5,000. for his shop and spends $20,000. per year on materials. Gomez has $40,000 of his own funds invested in equipment (pottery wheels and kilns..

  Compute opulenzas current account

Compute Opulenzas current account. Is CA a deficit or a surplus. Explain intuition for C4 deficit/ surplus in terms of savings in Opulenza, financial flows and its domestic/external wealth position.

  Tuckers industrial engineers have informed management

Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units every hour

  Paper creates a fundamental contradiction

Paper creates a fundamental contradiction. Your task was to recommend policies to protect the industry in the event of the next economic crisis. Your main recommendation was to open the industry and allow more competitors into the industry.

  Consider proportional sales tax and progressive sales tax

The simple case of a fixed per-unit tax is indicative of more complicated ones. Consider a proportional sales tax and a progressive sales tax. How do the tax revenues, and quantities produced compare in these various cases? Explain how value can be c..

  Potential output and the natural rate of unemployment

What is the relationship between potential output and the natural rate of unemployment? a. If the economy currently has a frictional unemployment rate of 2 percent, structural unemployment of 2 percent, seasonal unemployment of 0.5 percent, and cycli..

  Significant progress on the poverty front

Will there be significant progress on the poverty front, because of an increase in GDP.

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