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Author Question: Anti-depressants Roche developed a treatment for a rare form of depression that kept patients ... (Read 85 times)

geoffrey

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on: Jul 1, 2018
Anti-depressants Roche developed a treatment for a rare form of depression that kept patients feeling fine and kept them functioning normally. Sufferers greatly preferred this treatment over alternatives that would tend to put them into a near-catatonic stupor. However, for a subset of the population with high levels of a certain enzyme, the drug could cause permanent damage and death. So Roche required regular blood tests, and refused to sell to any patients who's levels of this enzyme became elevated. Many blood labs sued to be allowed to perform these blood tests. Why was Roche reluctant to allow third-party blood tests?

Question 2

Suppose the monopolist only sold the goods separately. What price will the monopolist charge for Good 1 to maximize revenues for good 1?
 a. 2,300
  b. 2,800
  c. 1,200
  d. 1,700


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amanda_14

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Reply #1 on: Jul 1, 2018
Answer to Question 1

Roche is concerned about quality control. If a third-party blood lab failed to find elevated enzyme levels, it would impose the bulk of any liability on Roche, not the lab. Roche could better guarantee quality lab work by vertically integrating into the performance of these tests.

Answer to Question 2

a


geoffrey

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Reply #2 on: Jul 1, 2018
Thank you :)


amanda_14

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Reply #3 on: Jul 1, 2018
Happy to help you


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