ECO550 Week 8 Scenario Script Contracting, Governance, and Organi.docx

ECO550 Week 8 Scenario Script: Contracting, Governance, and
Organizational Form
Slide #
Scene #
Narrations
Slide 1
Scene 1
An older cottage style family run business (Katrina’s Candies)
Slide 2
Scene 2
Conference room, weekly meeting Ken Sanders leading the
meeting of Herb, Gigi, Renee, Maria.
Ken reports he’s considering merging with another company.
Those present consider how the merger might transform
Katrina’s Candies if the companies merge.
Each team member presents information about “mergers. Herb
then does a presentation on market changes.
Ken: Good afternoon everyone!Thanks for responding in such
short-notice to meet today. I have important information to
share with you today, so let’s begin.
For the past seven weeks each of you has been engrossed in
completing tasks associated with the plan to expand Katrina’s
Candies into the international chocolate candy market. While
you were responding to your assignments, I have been
considering the possibility of merging with another company.
Today I want to share the merger idea and get the team’s input.
Gigi: Ken, are you saying we are not going to expand Katrina’s

Candies?
Ken: No, Gigi. I’m saying that as an alternative to expanding
via capital investment, our company should consider a merger
as a viable expansionary alternative. I like to think of merging
with another company as a form of expansion!
Gigi: So, let me get this straight; mergers are a form of
expansion?
Ken: Yes, a merger is an expansion since the resulting
combined firms is larger than the independent firms. Therefore,
if Katrina’s Candies were to merge, the result would be a larger
company. At least that would be our goal, a larger post-merger
Katrina’s Candies.
Renee: Does a merger have the same advantages for Katrina
as an expansion? What about the merger advantages over a
physical expansion? I seem to have quite a few questions.
(Laughter)
Ken: Well a merger could be better than an expansion. For one
thing a merger means immediate penetration of an existing
market. In an existing market, we would not have to focus on
developing demand for our sugar-free-chocolates; or any other
product. Also, depending upon the location of the company
involved in the merger, manufacturing resources could require
smaller outlays than the cost of enlarging our existing physical
plant.
Maria: How much cost savings is there when firms merge?
Am I asking the right question?
Ken: Yes, Maria, you are asking the right question. There are
other questions we need to consider, as well. I had a consulting
firm make a short presentation overviewing a few issues we

need to consider as we evaluate the merger option. Here, let’s
see what the consulting firm had to say.
Slide 3
Scene 3
Interaction Slide
Ipad will be showcasing the video:
· Mergers and Acquisitions: The world’s best lecture tutorial in
a nutshell.
· http://www.youtube.com/watch?v=J-t6zD5G4bk
Slide 4
Scene 4
Ken, Gigi, Renee, Maria and Herb in the Conference room
After viewing the video, still in the conference room, Ken gives
the team an assignment.
Ken: I know each of you probably has important thoughts about
my proposal to consider merging Katrina’s and thoughts about
the consultants’ advice. I would like to hear your thoughts. But
before you share your thoughts, I want you to go back to your
respective offices, reflect, and then return in two days for a
discussion.
Use the time between now and our next meeting to gather
information about mergers and then be ready to share
information.
Gigi: Any particular areas we need to concentrate on, Ken?
Ken: Not necessarily. However, to avoid duplication of efforts,
the team could organize its efforts according to areas of
expertise. Gigi, how about you focus on management issues;
Renee and Maria, could you two concentrate on financial
aspects, and Herb, could you provide us with some background
information on the different types of mergers. Does this work

for everyone?
Gigi: Yes!
Renee: Yes!
Maria: Yes!
Herb: Yes!
Ken: Okay, we will meet here in two days at the same time.
Clear your schedules for this meeting; we’ll meet until we
arrive at a consensus for this issue.
Slide 5
Scene 5
Two days later, Ken and the entire team are back in the
conference room. Ken starts the meeting.
Show the consultants advice on screen
· Merge only if the merger generates “incremental value” of 50
percent or more.
· Ignore adviser’s advice.
· Look for revenue synergies.
· Create an implementation plan as soon as possible.
· Leave a margin for error.
Ken: Okay, the floor is open for discussion about the proposal
to merge Katrina’s Candies instead of expanding in the
traditional way. As a reminder, here’s a summary of the advice
the consultants gave us.
Herb: Thanks for showing us this Ken. It is very helpful to see
this prior to making our decisions.
Ken: You’re welcome! I’m almost afraid to follow the

consultants’ advice because of their second suggestion “don’t
listen to advisers”! (Laughter) Who would like to begin?
Gigi: Herb is going to start us off with some background
information about mergers then he will provide us with some
basic information about some different types of mergers.
Herb: Thanks, Gigi. I started my research by searching news
and financial websites for merger basics. I learned that some
very large firms have used mergers to expand their firms.
Here’s a list of the sources I consulted. There were lots more,
but the one’s I selected describe current merger trends.
Slide 6
Scene 6
Interaction Slide
Slide will have several links to webpages that support Ken’s
findings.
· Mergers and Acquisitions — The 10 Biggest Deals in 2013.
· http://investorplace.com/2013/12/mergers-and-acquisitions-
biggest-deals-2013/#.UtLKqNJDuAg
· Cineworld merger widens vision as Europe’s second biggest
cinema chain.
· http://www.theguardian.com/business/2014/jan/10/cineworld-
merger-europe-second-biggest-cinema-chain
· Cross-border mergers and acquisitions deals soared in 2013.
· http://www.haaretz.com/business/.premium-1.567841
· Institute of Mergers, Acquisitions and Alliances (IMAA)
· http://imaa-institute.org/statistics-mergers-acquisitions.html
Slide 7
Scene 7
Herb and the rest of the team are in the conference room. Herb
then describes the information he learned mergers from each of
the four sources

Show chart showing worldwide mergers from the IMAA web
link
Show chart showing China’s mergers
Show prepared chart of Types of Mergers
Herb: As indicated, I-M-A-A data shows decreases in merger
behavior worldwide since 2007. I think these declines are
consistent with the global economic slowdown that impacted
world economies. However, there are some exceptions such as
China, which from 1993 to 2013 data shows a generally upward
trend in merger activity. Overall, although the numbers are
lower in 2013, all news sources are reporting an upward trend in
merger and acquisition activities.
Gigi: Any questions about this part of the information Herb
presented before he moves on to part two?
Ken: Can we see the data for China’s mergers? I’m just a bit
curious to know what’s occurring there.
Herb: Sure thing Ken! Here’s China’s chart.

Herb: You can see the difference between China’s mergers and
acquisitions trends along with the worldwide trend showing an
increase throughout the twenty-year period.
Ken: These statistics indicate we might want to look for a
Chinese company to merge with Katrina’s Candies. Very
interesting! Okay, Herb you can continue with your
presentation.
Herb: After reviewing information on merger trends, I
wanted to know exactly what it meant to “merge” two
companies. I learned there are several types of mergers and here
is a list I formed.
Slide 8
Scene 8
then describes the information he learned mergers from each of
the four sources.

Gigi then shares her findings about mergers.
Herb: Let me now briefly explain each type of merger.
When companies from different industries merge, the result is a
“conglomerate.” The purpose of this type of merger is for the
merging companies to “share knowledge.” In its purest form,
conglomerate firms have nothing in common. However, in some
instances the merger creates a mixed conglomerate meaning the
firms have something in common.
When companies within the same industry merge to supply the
same good or service, it’s called a horizontal merger.
According to the information I found, horizontal mergers occur
in industries where there are only a few firms.

Product extension is another type of merger. In the case of this
type of merger, firms want to get a larger share of consumers.
Keep in mind that post merger profits should be higher for the
merged firms.
Next, we have market extension mergers, which occur when
firms want to expand their market.
Lastly, we have vertical mergers, whichinvolve one company
merging with another company that supplies inputs to the
production process. Vertical integrations tend to happen when a
firm experiences problems in either supply chain or distribution
process. Vertical integration can also lead to cost savings,
depending upon the proximity between merging firms.
Ken: So based on your research what do you think would be the
best option for Katrina’s Candies?
Herb: I would have to say that product extension and market
extension sound like the most viable merger types to accomplish
the Board’s discussion to expand Katrina’s globally.
Ken: Why did you exclude the possibility of a “horizontal
merger”?
Herb: During the team’s investigation of Katrina’s market
structure, we learned from concentration ratio statistics that
Katrina’s Candies is in an oligopolistic market. A few firms
already dominate the market. However, although there are a few
very large firms in the chocolates’ industry, there are about two
hundred firms of other sizes. Merging horizontally in this type
of industry would monopolize the industry and I don’t think the
Federal government would approve.
Ken: The Federal government has to approve mergers?

Herb:Yes, companies proposing to merge must make the merger
plan available for government review and approval.
Ken: Interesting! Okay, who’s next?
Gigi:I’m next. I wanted to know whether merging firms is a
common practice. I also learned about the management impact
of a merger. My contribution is in the form of a short video.
This video illustrates the importance of thoughtful planning to
avoid the negative side effects of mergers. Coincidentally, one
of the featured firms is a chocolate manufacturer.
Slide 9
Scene 9
Interaction Slide
Ipad will be showcasing the videos:
· How to take charge and plan for the future of your business.
· http://www.youtube.com/watch?v=7C_z8UuCJ-Y
Slide 10
Scene 10
Gigi and the rest of the team are in the conference room. Gigi
continues to talk about her findings.
Gigi: As I listened to opinions about how firms are using
mergers to grow their companies, I understood why Ken is
interested in merging Katrina’s with another firm.
Renee: I agree! As I was listening to the video, I also began
thinking a merger might be a good strategy. I’ll explain further
after you finish Gigi.
Maria: Actually I was more focused on the message in the
“Nutty Chocolate” video, the message that firms must plan a
merger or face disaster during the initial post-merger phase. It
was sort of scary to me but when I saw how different outcomes
can occur when a plan guides the merger my fears subsided.

Ken: This is the type of dialogue I’m considering! But before
we dissect the issue without hearing from everyone, let’s hear
from Renee and Maria.
Slide 11
Scene 11
Maria and the rest of the team are in the conference room.
Maria begins to talk about her findings.
Maria: Some of what I was going to share has been covered
by others. So I’ll confine myself to explaining the profit
enhancing potential and tax advantages of merging with another
company. Based upon my research, I learned Katrina’s Candies
could reduce average costs of production by merging with the
right type of firm. For example, if it were to merge with a firm
that supplies inputs we use to manufacture chocolates, input
costs would decline leading to a reduction in the average total
costs. Also, if the firm we merge with is unprofitable, yet has
market shares, it could realize savings through tax write-offs.
Either of these cost-reducing methods would ultimately increase
profits.
Ken: Great research Maria! Renee, your turn now.
Renee: The information I learned also focuses on cost
savings. Merging offers the possibility of economies-of-scale
from increasing in size and offers the benefit of reducing the
risk that’s associated with a capital expansion. Since
performance data already exists for both firms, there are
essentially no secrets and Katrina’s Candies would not be
exposed to as much risk associated with a capital expansion;
assuming, of course, we identify the right type of firm.
Gigi: Ken, there are also some unfavorable aspects from
merging firms. The merger plan video illustrated a couple. One
issue is the duplication problem that results when management
teams from different firms are appended to each other, which

can make duplication costly. There is also the possibility of
misallocations of resources.
Renee: An additional problem occurs when it’s time to decide
what name to use for the merged firms. Which firm’s name is
retained for the merged firm; or, is neither name retained?
Herb: Then there is the matter of organizational form the new
firm would take. A decision would have to be made as to who
would own and manage the merged firm. This could deal with
whether the merged firm would be jointly or separately
managed. Assets are also impacted. Keep in mind that the
“principal-agency problem” becomes a major concern under the
merger scenario especially if merging companies opt to
maintain separate managements.
Maria: The other very important issue is that in addition to
government approval, mergers require stockholder approval. I
checked Katrina’s Candies approval quotas and two-thirds of
the stockholders must approve a merger.
Herb: Two-thirds, that’s a lot!
Ken: Yes, it is. However, there’s no way around that
stipulation. If a merger is the preferred strategy for further
expansion of Katrina’s global position, we’ll have to take our
chances with stockholders.
Maria: If necessary, we could put a campaign together to
solicit stockholder votes. We used campaigns in the past
when we needed the stockholders to approve other types of
changes.
Herb: Is there any information about the impact mergers
have on stockholders?

Ken: Hold-on, we don’t want to get ahead of ourselves. I know I
said we would meet until we reach consensus; however, the
information I’ve heard so far adds a complexity to the situation
I didn’t anticipate.
Slide 12
Scene 12
then explains another important merger type.
Herb: I don’t want to further complicate the matter,
however, instead of combining Katrina’s Candies with another
firm, why not implement a “contract merger” This is a form of
merger I totally forgot to mention. Using this kind of merger
would negate the need for stockholder approval as it’s called a
contractual agreement.
Ken: What type of merger is this?
Herb: There are several types of “contractual mergers” but
each shares the common feature that firms merge without
actually combining companies. Here’s a short list of types of
contractual mergers that could be utilized by Katrina’s.
Katrina’s could merge via contract. For example, Katrina’s
Candies could enter into a vertical contractual agreement with
either a supplier or distributor. A contract would achieve the
desired goal of expanding it without the problems associated
with a merger such as duplication of services, stockholder
approval, government approval, and so on. Also, the capital
investment required when firms merge in the traditional way is
also significantly reduced when contractual merger is used.
Ken: Thank you for sharing this with us Herb. This could be
very useful!
Herb: Do you have a particular company in mind, Ken? I
think the teams’ opinion about both merger types is going to

depend upon the firm you have in mind.
Ken: I have a few companies in mind currently but nothing is
set in stone yet.
I feel that for now, we have sufficient information about
mergers that we can turn this matter over to Herb to include in
his presentation.
Herb: You are right Ken, we went over a lot today and this
sounds like a good place to stop. Team; please send me
whatever comments you may have along with your
recommendations about merging. Before we all go I think it
would be best if we did a review since we covered so many new
topics today. Therefore, I would like for you to participate in a
review activity I put together based on the key items we
discussed.
Slide 14
Scene 14
Check Your Understanding
Simjuck and DoDoBird Inc. are proposing to merge. Simjuck
produces and sells dehydrated seafood; its market share is 38
percent. DoDoBird Inc. owns a chain of restaurants located
across the country and has a market share of 22 percent. If the
federal government approves Simjuck’s and DoDoBird’s
merger, the horizontally merged firm will control 60 percent of
the industry. Is this statement True or False?
False is the Correct answer.
Explanation: The statement is false. Simjuck’s and
DoDoBird’s merger would not be a horizontal merger.
Horizontal mergers occur when both firms sell or produce or
manufacture the same product.
True is the Incorrect answer. The statement is false. Simjuck’s
and DoDoBird’s merger would not be a horizontal merger.
Horizontal mergers occur when both firms sell or produce or
manufacture the same product.

Scene 15
Summary
Concluding scene taking place in conference room
Herb: I hope this review activity was helpful to everyone!
Ken: Yes, it was helpful.
Gigi: I agree!
Maria: Thank you for sharing this with us, Herb!
Renee: Yes, Thank you, Herb.
Herb: You are all welcome! Let’s now start our final review
about what we all discussed today. Who wants to go first?
Ken: I will go first! We learned that mergers can be used to
expand firms. We also took note that U.S. firms planning to
merge must obtain approval from the federal government.
Maria: We also learned that stockholders must also approve
merger plans.
Gigi: During our discussion today, Herb showed us that recent
trends in the U.S. and around the world show an increase in
merger activity.
Renee: We later talked about the outcomes of merging is
dependent upon the type of merger the firm makes. We also
made note of some recommendations advisors made pertaining
to the merging only if the merger is revenue enhancing.

Herb: Lastly, I talked about contractual mergers and mentioned
that they can be used in place of capital investment mergers.
Ken: Fantastic review everyone! I’m excited to continue our
discussion about the direction Katrina’s Candies will be taking
to expand globally! Until we meet again, don’t forget to
complete your weekly threaded discussions based on the key
concepts we covered this week. Have a great day everyone!
ECO550 Week 7 Scenario Script: Best-Practice Tactics, Game
Theory, and Pricing Techniques and Analysis
Slide #
Scene #
Narrations
Slide 1
Scene 1
An older cottage style family run business (Katrina’s Candies)
Slide 2
Scene 2
In Gigi’s office where Herb explains to Gigi why a large
company like Katrina’s Candies cannot ignore industry
rivals and why predicting rival responses is an important
determinant of decisions Katrina's Candies makes.
Gigi: Good Afternoon, Herb!
Herb: Hello, Gigi.
Gigi: I called you into my office today to talk about rival
behaviors in our chocolate market. I had a couple of questions
pertaining to this subject. My first question is, based on your

time with Renee, what kind of market structure does Katrina’s
Candies operate in?
Herb: Renee and I determined that its Chocolates operate
within an Oligopolistic market structure, and we noted that
there are only three firms in our market that are larger than
Katrina’s Candies.
Gigi: This market classification means that the market has
consolidated over the past fifteen years. When I started
working here, there were a lot of other candy manufacturers and
the market seemed to feature more monopolistic competition.
Herb: Perhaps the trend towards healthier life-styles was
too much for those firms that left the market; especially
burdensome is the higher cost associated with innovating
products just to be able to stay in the market. Therefore, it’s
good Katrina’s Candies was able to survive the adjustment that
took place in the market.
Gigi: I couldn’t agree more, Herb. All of its employees have
helped maintain our competitive posture so far—from
management to employees working on the manufacturing side of
the operation. We’ll just have to repeat the effort we
organized.. We ignored all of the other chocolate manufacturers
and focused our efforts on making good chocolate. We
should implement a similar strategy now.
Herb: The narrowly focused strategy Katrina’s Candies used
previously to survive in the market might have worked with a
larger number of manufacturers than what is present in today’s
market. However, today, given the information that the market
has a few dominant firms, the strategy of ignoring other firms
will not work. Katrina’s Candies has to be aware of these
markets and consider the reactions of other firms. Comment by
Dr. Blue: This is not clear.

Scene 3
company like Katrina’s Candies cannot ignore industry rivals
and why predicting rival responses is an important determinant
of decisions it makes.
Gigi: I’ll defer to your opinion on this one, Herb. We brought
you on the team because you have the most current information
about best practices, so with that being said, how should
Katrina’s Candies proceed?
Herb: The simple answer to your question is that we now
need to focus attention on its competitors. We can develop a
matrix of how competitors might respond if Katrina’s Candies
expands into the international market.
Gigi: How can we create a matrix of other firms’ reactions? We
can’t survey our competitors to ask what they will do if we
expand; I think that would violate U.S. anti-trust laws
prohibiting collusion amongst firms.
Herb: That’s correct! We cannot directly engage
competitors by telephoning firms and asking questions.
However, we can build a matrix of hypothesized reactions based
upon theories that attempt to explain the behavior of
oligopolistic firms. There are several theories we can review
and use such as:
The Kinked Demand Curve theory;
The Price Leadership Theory; and
Game Theory.
The common assumption among these theories is that firms
operating in oligopolistic markets are “interdependent” meaning
that the level of profit each firm earns depends upon the
behavior of other firms within the market.

Gigi: Can you elaborate on this connection between
interdependence and Katrina’s Candies profit?
Herb: Yes. It works like this. Remember how overall profit is
defined as the difference between total revenue and total cost?
Gigi: Yes, I remember.
Herb: Also recall that Total Revenue is derived by
multiplying Price times the Quantity sold. In the market
Katrina’s Candies is in, the price we set depends upon the price
our competitors set; and vice versa. That’s the reason the
three oligopoly theories assume interdependence.
Gigi: Okay, I believe I understand the interdependence
assumption now.
Slide 4
Scene 4
company like Katrina’s Candies cannot ignore industry
rivals and why predicting rival responses is an important
determinant of decisions it makes.
Herb: Let’s now review Kinked Demand Theory. Assume
there are two firms considering two decisions about price.
Decision one is to raise prices and decision two is to lower
prices. According to kinked demand curve theory, if one firm
chooses to lower prices, the other firm will also lower their
prices. However, if one firm raises prices, the other firm may
not raise prices.
Gigi:Why would a firm ignore a price increase? Wouldn’t an
increase in price increase the firm’s total revenue?
Herb: An increase in the price of an oligopolist’s product
would increase total revenue only if the other firm reacted by

also increasing the price of its product. However, if firm A
were to increase price and firm B did not react by increasing
price, consumers would switch from consuming firm A’s
product to consuming firm B’s product because both sell the
same type of product.
Gigi: Is this all there is to kinked demand curve theory?
Herb: Almost. Although the theory states that firms would
follow price cuts, oligopolists avoid using price to compete.
Instead, oligopolists engage in lots of non-price competition;
for example, spending on advertising as a way to compete.
Gigi: Is there a reason firms behave differently than theorists
predict?
Herb: Yes, by using price to compete this can sometimes
cause a price war for the best prices. To avoid that outcome, it’s
best for firms to compete in ways that don’t affect price. Let’s
look at an example of the Kinked Demand Curve Theory.
Slide 5
Scene 5
Interaction Slide
· Kinked Demand Oligopoly: The lack of price competition.
· http://www.youtube.com/watch?v=HT9t-zjYi_A
Slide 6
Scene 6
In Gigi’s office with Herb briefly commenting on Kinked
demand curve theory and preparing to view other presentations
Gigi: That was a very interesting explanation of Kinked demand
theory. The example brought everything into perspective.
Herb: Fantastic! The next concept I want to cover is Price

Leadership theory. I found two short videos that will give you a
basic overview of the basic assumptions of this theory.
Slide 7
Scene 7
Interaction Slide
Ipad will be showcasing these videos:
· Price Leadership 1
· http://www.youtube.com/watch?v=AtH4_lU_T8k
· Price Leadership 2
· http://www.youtube.com/watch?v=GeD2fwjJ8_U
Slide 8
Scene 8
In Gigi’s office where Herb talks about Price Leadership Theory
and Game Theory with Gigi
Gigi: Thank you for showing me those videos Herb; they were a
great overview! I now understand the difference between a
firm’s behavior in a kinked demand curve environment and in a
price leadership environment. Initially, I thought the
uncertainty in the kinked demand curve outcome was restrictive.
After learning the basics of price leadership theory, the kinked
demand scenario seems more attractive.
Herb: I agree. The price leadership scenario does not
theorize a good outcome for Katrina’s Candies Chocolates, even
though they are the fourth largest firm in the chocolate industry.
Gigi: So, what can we here at Katrina’s Candies do in this type
of market?
Herb: Katrina’s Candies must be very strategic with its
decisions! All decisions must be based upon the assumption
that its nearest competitors will respond to the decisions they
make.

Gigi: So, that’s your recommendation? Let the competitors react
to our decisions?
Herb: Yes, I feel we should go along with that assumption and
also look into a foundation involving “Game Theory.” Game
Theory is a theory that provides a model for predicting the
behavior of rivals. It looks at strategic decision making!
Gigi: How do we apply this model to make a prediction?
Herb: Here, take a look at this video. The video will give
you an idea of how we need to be rational throughout various
scenarios.
Slide 9
Scene 9
Interaction Slide
· Game theory in real life
· http://www.youtube.com/watch?v=2o3H0AtEylg
Slide 10
Scene 10
In Gigi’s office where Herb talks about Game Theory with Gigi
Gigi: (laughter) That skit is hilarious!!
Herb: Yes, it is! Every time I view it, it makes me laugh!
Gigi: I can see why! However, it’s a great way to summarize
the game theory method. Did you hear how many times they
used the word “probably”?
Herb: Yes. Can you imagine how we’re going to sound
speculating about the reactions of Katrina’s Candies rivals!

Gigi: (Laughter) I hadn’t thought about that! However, we need
to stop here for today because I have an appointment with a
client in a few minutes.
Herb: Before you go I think it would be best if we did a
review since we covered so many new topics today. Therefore, I
would like for you to participate in a review activity I put
together based on the key items we discussed.
Gigi: Good thinking Herb. I will go through your review
activity and then we will have a final review to finish up our
time together today.
Slide 11
Scene 11
Interaction Slide
· Micro 4.8 Oligopolies and Game Theory
· http://www.youtube.com/watch?v=AOEbJF0k8vM
Slide 12
Scene 12
Check Your Understanding
Answer the following questions based on the payoff matrix for a
one quarter time-period, for Katrina’s Candies and Gooey’s.
The numbers in the matrix indicate the profit in billions of
dollars for an international or national strategy. The profit
outcome cells are A, B, C, and D.
(insert matrix picture for question)
Question:
· Which strategies are the dominate ones for Katrina’s Candies
and Gooey’s?
Choices:
· International

· National
· Demand theory
· Game theory
Correct Answer:
· The dominant strategy for Katrina’s Candies and Gooey’s is to
always choose the international strategy.
Slide 13
Scene 13
Summary
Concluding scene taking place in conference room
Herb: Gigi, I hope the review activities were helpful!
Gigi: They were great, Herb! Thank you for sharing these
review materials with me; they were a great review tool. Can we
now complete a review of what we accomplished today so I can
be prepared for my next meeting with Ken?
Herb: Sure thing! We first established that Katrina’s Candies is
operating in an oligopolistic market, meaning that at least three
chocolate manufacturing firms dominate the market. I also
mentioned that currently Katrina’s Candies is number four in
this market.
Gigi: I also remember you talking about the primary
characteristic of firms in oligopolistic markets is mutual
interdependence.
Herb: That is correct, and I’m glad you remembered that! I also
explained three theories that offered explanations for the
behavior of oligopolistic firms.
Gigi: I believe those three theories were the Kinked Demand
Curve theory, Price Leadership Theory, and Game Theory. You
also provided me with videos that really helped solidify these
three theories.
Herb: I’m glad that those videos were helpful for you! I believe
you will be very well prepared for your next meeting with Ken

to discuss the future of Katrina’s Candies.
Gigi: That is fantastic and I believe that is all for our meeting
today. Until we meet again, don’t forget to complete your
weekly threaded discussions based on the key concepts we
covered this week.
Herb: Thanks Gigi and have a great day!

ECO550 Week 8 Scenario Script Contracting, Governance, and Organi.docx

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ECO550 Week 8 Scenario Script Contracting, Governance, and Organi.docx