Bertaline and AlphaOmega are small drug companies. Bertaline has recently signed an agreement with a big pharmaceutical company from India, and obtained from them a patent on a new antibiotic that is effective against some bacteria that are resistant to other drugs that are currently in the market. Unfortunately, after running some tests, the company realized the drug had severe side effects, making it unsuitable except for patients who expected desperately to have a drug that could help them. Ownership of this drug is worth $60 (million) to Bertaline under the current situation. AlphaOmega, through their own development, obtained a patent on another drug that is of no therapeutic value in itself, generating no current income currently for the company. However, when combined in a particular way with the Bertaline antibiotic, it dramatically reduces the negative side effects. The value of the two drugs together is estimated at $100 (million). AlphaOmega intends to sell its patent to Bertaline and it is negotiating to do that ASAP. What price would be implied by the Nash bargaining solution?

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Answer In the Nash bargaining solution the negotiating parties aim to maximize their joint surplus w... View the full answer