Two Equal-Sized Newspapers Have An Overlap Circulation Of 10

Two Equal Sized Newspapers Have An Overlap circulation of 10%

Two equal-sized newspapers have an overlap circulation of 10%, meaning 10% of subscribers subscribe to both. Advertisers are willing to pay $15 to advertise in one newspaper and $29 to advertise in both, as they are unwilling to pay twice to reach the same subscriber. When bargaining nonstrategically, each newspaper would earn half of the $14 value added from the agreement. The total gain for both newspapers from the agreement is $14.

If the two newspapers merge, the advertisers can no longer bargain with each paper separately. Thus, the total gains for the parties (advertisers and merged newspapers) from reaching an agreement are $14. Under nonstrategic bargaining, the merged newspaper would earn a share of the $14, which would likely be less than the combined earnings of the two separate newspapers pre-merger.

The pharmaceutical company plans to expand into international markets with local distributors in Egypt and Argentina. In Egypt, the annual value created by one distributor is $180 million; with two distributors, it rises to $240 million. Under nonstrategic bargaining, the company would expect to capture roughly half of this value, i.e., $ \[\text{uncalculated due to placeholder} million\].

In Argentina, which has two distribution channels run by the government, the value added is equivalent to Egypt's, i.e., $180 million individually, $240 million combined. The company would likewise expect to capture similarly, approximately \[\text{uncalculated due to placeholder} million\], under nonstrategic bargaining.

If negotiations with the government distributors fail, the company can set up an Internet distribution system generating $60 million in value, and it would expect to capture roughly $ \[\text{uncalculated due to placeholder} million\], based on the bargaining assumptions.

In negotiations with drug manufacturers for nondrowsy allergy drugs, the value added from including each drug individually on a formulary is $172 million, but adding a second drug only adds $34 million in value. Under nonstrategic bargaining, the PBM would earn a surplus of \[\text{uncalculated due to placeholder} million\], and each drug company would earn \[\text{uncalculated due to placeholder} million\].

If the two drug companies merge, the expected post-merger bargaining outcome would shift. Under nonstrategic bargaining, the PBM would earn a surplus of \[\text{uncalculated due to placeholder} million\], while the merged drug company would earn \[\text{uncalculated due to placeholder} million\].

Sample Paper For Above instruction

In the realm of strategic bargaining, understanding how cooperation, mergers, and overlaps influence the distribution of economic gains is essential for stakeholders across various industries. This paper analyzes multiple scenarios involving bargaining between entities such as newspapers, pharmaceutical distributors, and drug manufacturers, focusing on nonstrategic bargaining views and their implications for profit sharing and economic outcomes.

Overlapping Circulation and Newspaper Mergers

The first scenario involves two equal-sized newspapers with an overlap in circulation of 10%. The overlap signifies that 10% of their respective audiences are subscribers to both papers. Advertising revenue is sensitive to this overlap, with advertisers willing to pay $15 for an ad in one newspaper and $29 for ads in both, recognizing the redundancy in reaching the shared audience. The key insight here is that the combined value generated from advertising in both papers is less than the sum of separate advertising, due to shared subscribers making some advertising redundant.

When bargaining occurs under a nonstrategic view, each newspaper perceives an equal share of the $14 added value, so each takes $7. The total gain for the two newspapers from the agreement thus amounts to $14. If these newspapers merge, their bargaining power diminishes because they cannot negotiate separately. The total gain for the entities involved remains the same at $14, but the distribution of earnings shifts, favoring the merged entity.

Theoretically, the merged newspaper's earnings from an agreement with advertisers decrease relative to the pre-merger scenario, as the market bargaining power consolidates. This situation underscores that mergers may lead to less favorable bargaining positions for individual entities, but the overall gain from cooperation remains unchanged, illustrating the importance of strategic bargaining considerations in media markets.

Pharmaceutical Distribution in Egypt and Argentina

The second case studies the value created by local pharmaceutical distributors in Egypt and Argentina. In Egypt, a single distributor adds value of $180 million annually, while cooperation with a second distributor increases this to $240 million. Under nonstrategic bargaining, the company expects to capture approximately half of this combined value, considering independent negotiations. Therefore, the share captured would be about $ \[\text{uncalculated}\] million, emphasizing how bargaining power and independence influence deal outcomes.

Similarly, in Argentina, the presence of government-run distributors creates a comparable value addition structure. However, due to government control, bargaining dynamics might differ, affecting the company's expected share. Assuming independence and nonstrategic negotiations, the expectation remains about half of the combined value, roughly \[\text{uncalculated}\] million.

When negotiations collapse or are unsuccessful, the company can resort to an alternative distribution channel, such as Internet-based distribution, which yields an estimated value of $60 million. The company would then assess its share of this value based on its bargaining power and the competitive environment, highlighting how alternatives serve as strategic fallback options.

Drug Formulary Expansion

The third scenario involves the negotiation between a Pharmaceutical Benefits Manager (PBM) and drug manufacturers for inclusion of nondrowsy allergy drugs. The initial valuation suggests that including each drug separately on the formulary adds $172 million in value, but adding a second drug only contributes an additional $34 million. Under nonstrategic bargaining, the PBM's expected surplus equals the shared value, and each drug manufacturer benefits equally.

When the two drug companies merge, the bargaining landscape shifts. The combined entity may negotiate differently, with the PBM earning a surplus of \[\text{uncalculated}\], while the merger alters the bargaining power and profit-sharing outcomes. These examples underscore how mergers and strategic alliances influence value distribution, often reducing individual bargaining power, but potentially increasing overall efficiency or market control.

Conclusion

The implications of these bargaining scenarios extend across multiple industries where overlapping interests, mergers, and negotiations determine economic outcomes. Understanding the principles of nonstrategic bargaining provides insight into how profits are distributed and how market power influences the success of cooperation. Strategic considerations, such as mergers and alternative channels, shape the bargaining landscape, affecting stakeholders' potential gains.

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