TAILIEUCHUNG - Ebook Managerial economics (7E): Part 2
(BQ) Part 2 book "Managerial economics" has contents: Game theory and competitive strategy, regulation, public goods, and benefit cost analysis, oligopoly, decision making under uncertainty, asymmetric information and organizational design, the value of information, auctions and competitive bidding, linear programming. | to download more slides, ebooks, and solution manual visit C H A P T E R 9 Oligopoly It is in rare moments that I see my business clearly: my customers, my organization, my markets and my costs. Then why do I still lie awake at night? I’m trying to figure the damn strategies of my competitors! A MANAGER’S LAMENT In the early 1990s, the infant-formula industry accounted for annual sales of some $2 billion. Abbott Laboratories, Bristol-Myers Squibb, and American Home Products Corp. dominated the market with 50 percent, 37 percent, and 9 percent market shares, respectively. The growth of the overall market had been uneven. Until the early 1970s, breast feeding of babies was on the decline, sinking to a low of 20 percent of mothers. Formula makers prospered by offering mothers the convenience of bottled milk. Twenty-five years of research, however, convinced pediatricians that mother’s milk is the optimum baby food. In the 1990s, about 50 percent of American mothers breast fed their babies. The three dominant companies employed strikingly similar business practices. The formulas they sold were nearly identical (and must have the same nutrients by federal law). The companies charged virtually the same wholesale prices. They increased prices by an average of 8 percent annually over the decade (while milk prices increased by 2 percent annually). They produced a 13-ounce can at a marginal cost of about $.60 and sold it for an average wholesale price of $. With average total cost estimated to be about $ per can, the companies enjoyed nearly a 25 percent profit margin. The companies engaged in almost no advertising; instead, they promoted and marketed their formulas via give-away programs to Collusion in the Infant Formula Industry 349 350 to download more slides, ebooks, and solution manual visit C h a p t e r 9 Oligopoly hospitals and doctors. Such programs were very effective. Research .
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