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""Read ?Big Enchilada Strategy? and answer the fol...




""Read ?Big Enchilada Strategy? and answer the following question. If you are one of the companies, what would you bid and why? also answer the question with in the story. "What should the two companies do? " (Answer should be a paragraph or two. Thank you) The ?Big Enchilada Strategy? (This is based on actual market behavior as revealed in Congressional testimony) A new drug in the 1950s was considered a wonder antibiotic and widely prescribed by doctors. It was also cheap to produce, costing 10 cents a tablet. The market was divided by two drug companies which sold the capsules to retailers for about $1.00 a capsule. By contrast mark-ups for most products in most industries are more in the range of 10 to 20%. Fixed costs were minimal. The two companies obviously were making handsome profits on the drug when a huge new customer, the Public Health Service, requested bids on an order. Only one company would get the contract. What should the two companies do? Given the size of the order, any price over 10 cents would yield a company large profits, but the other company would have the same incentives, with the result that the two companies could end up, horror of horrors, actually competing and making minimal profits. A best case scenario for each company would be for the other company to hold the line at $1.00 and to win the bid by bidding 99 cents. One hint: I have called this the "Big Enchilada" situation for a reason and it is not because this drug aids digestion "


Paper#11784 | Written in 18-Jul-2015

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