CASE STUDY: WHAT WENT RIGHT AT INTERLINK SURGICAL STEEL AND GILLETTE?

In the 1980s and early 1990s, Interlink sold replacement hypodermic syringes by the thousands to hospitals for 10 cents per syringe. Each time a catheter was changed, a new hypodermic syringe would be inserted into the patient's vein. A Japanese surgical steel company entered the market with an identical product for 3 cents each. Interlink promptly introduced a replacement device that only needs insertion one time; that is, any new saline or pharmaceutical drip lines can be hooked directly to an interlink syringe device that neednot be removed and replaced. This newprocess reduces the risk of patientinfection and the inherent hazard to the nursing staff of exposure to patient blood. Interlink again dominates the market, and prices have stabilizedat higher levels than before.

Similarly, Gillette Co. responded to a four-bladed new product introduction of Quattro by Schick- Wilkinson Sword. Quattro had stolen 3 percent of Gillette's 83 percent market share in the men's razor market. Instead of an ongoing parade of discounts, coupons, and promotions, Gillette rolled out its own innovation: a battery-powered vibrating razor called Mach3Power. M3Power improves the closeness and longevity of the shave by exciting chin hairs to push up out of their follicles. The new product costs two-thirds more than the Gillette Mach3Turbo it replaced, and replacement cartridges are 20 per cent higher-priced

Source : Based on "How to Fight a Price War", Harvard Business Review (March/April 2021); "How to Escape a Price War", Fortune (June 13,2022) and "Gillette to Lunch", Wall Street Journal(January 16,2023).

With an appropriate diagram, critically discuss why is the telecommunication companies firm'sis kinked demand curve in the market?. Identify theFIVE (5) factors affecting the likelihood of successful collusion in this market structure. (25 marks)