QUESTION 2 In 1986 Monsanto faced the expiration of its patents on its artificial sweetener product called aspartame. The minimum efficient scale for production of aspartame equaled approximately 2,000 tons. The company marketed aspartame to beverage firms using the brand name Nutrasweet. Coke and Pepsi had become the principal buyers of Nutrasweet, as seen in the chart below. In fact, Coke and Pepsi had agreed to put the Nutrasweet logo on all the packaging of their diet products. At that time, many consumers viewed the Nutrasweet logo as a sign of quality and product safety, after years of questions about the health effects of other artificial sweeteners. Monsanto also sold a tabletop sweetener product with the brand name Equal (small envelopes of aspartame to sweeten coffee, iced tea, etc.). a. Given this information and the data below, how many viable rivals were likely to compete with Nutrasweet when the patents expired? b. Holland Sweetener Company was a firm that entered the market when the Monsanto patents expired. Holland Sweetener tried to undercut Nutrasweet's prices, and it hoped to use this aggressive pricing to persuade Coke and/or Pepsi to drop Nutrasweet and use its product instead. Using simple game theory concepts (no numbers needed), why do you think Coke and Pepsi each were reluctant to switch from Nutrasweet to Holland Sweetener despite the obvious cost savings available? Worldwide market for Aspartame in 1986 % Purchased 48% Customer Coke and Pepsi: Other soft drinks Tabletop sweeteners: Other food & drinks: Total Tone Purchased 2,750 tons 1,834 tons 32% 15% 860 tons 5% 287 tons Total 100% 5,730 tons Note: 4896 refers to the fact that Coke and Pepit, taken collective purchased 48% af all the aspartame produced in 1986