Lowering the price is under consideration. Unfortunately, fully allocated costs are such that the lower price results in a loss. Issues to be discussed and analyses to be conducted include the relevant costs for the decision and the reactions from competitors. Although these exercises are simplified versions of these problems, they have been written to preserve the "essence" of the decision situations.
The problems include product development sequencing, options for flexibility, market research, litigation, inventory decisions under uncertainty, bidding decisions, and choosing among theories. Describes Merck's decision tree evaluation process is presented. Information required to evaluate a specific licensing opportunity is provided, including the costs of the three phases of the review process, the revenues if approved, and the probability of various outcomes.
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