Question

The poinsettia is a wildflower native to Mexico. It was almost unknown in the U.S. until the Ecke family began selling them in the early 1900s from their flower stand in California. A member of the Ecke family discovered a grafting process that resulted in a much thicker and more colorful poinsettia plant, which became hugely popular at Christmas. The Ecke family did not attempt to patent the grafting process, but instead managed to keep the process a secret for many decades, and so maintained a monopoly on the commercial production of poinsettias for all those years. Eventually, a university professor figured out the grafting technique, and published it in an academic journal. What do you think happened to the price of poinsettias after publication of that article? Why?

Answer 1

This situation suggests a transformation from a single seller( Monopoly) to multiple sellers . It is known that when the monopoly of a firm comes to an end due to expiry of patent or any other such factors , it affects prices.

In this case also the prices would have been affected, rather reduced. Now there are many firms selling this wildflower with the grafting technique which was earlier a secret. So the competition increased which would lead to a reduction in prices because now more people are selling it and in order to have more revenue they might decide to reduce the prices than competitors. This would also have other effects.

Like the Ecke family would have to now increase their quality due to competition.

The price fall would not have been immediate if the process of making this grafting technique took some time like a few years . This would be the case when the machinery or equipment needs time to be manufactured

So by publishing the article , the professor had made the secret open to all which led to a decrease in prices and probably better quality.

(You can comment for doubts)