Oculus and Maxygen are small drug companies. Oculus has obtained a patent on a n

Question

Oculus and Maxygen are small drug companies. Oculus has obtained a patent on a new antibiotic that is effective against an emerging superbuglong dash—a bacteria that is resistant to traditional antibiotics. Unfortunately, the Oculus drug has severe negative side effects, making the drug unsuitable except for patients who are desperate.

Ownership of this drug is worth $30 million to Oculus under the current situation. Maxygen has a patent on another drug which has no therapeutic value in itself, so the drug generates no current income for Maxygen. However, when combined in a particular way with the Oculus drug, it dramatically reduces the negative side effects.

The value of the two drugs together is estimated at $50 million. What p maximizes the Nash product?

The p that maximizes the Nash product is

Explanation / Answer

ANS:- Ownership of this drug is worth $30 million to Oculus Under the Current Situation . The value of the two drugs together is $50 Million.

So According to NASH equilibrium the Price that maximize the NASH product is

NASH Price = (50-P)(P-30)

dNashprice/dP = 50P-1500-P2+30P

= 50-2P+30

2P= 80

P= 80/2= $40

So the Price is $40 .

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