When Corporate Crime Doesn’t Pay

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How pissed off must those guys who stole soft drink secrets from Coke have been when they learned that Pepsi ratted them out? What’s the point of engaging in corporate espionage if you can’t even sell the secrets to your victim’s biggest rival? Must really take the wind out of the sails of many a would-be corporate spy.
Why would Pepsi do that anyway? Were they afraid of getting caught? Is Pepsi simply run by paragons of legal compliance and other virtues? Maybe. Or maybe the problem was the Pepsi just doesn’t want to know the secrets of Coke. That’s what Freakonomist Stephen Levitt proposes.

Let’s say that Pepsi knew Coke’s secret formula and could publish it so that anyone could make a drink that tasted just like Coke. That would be a lot like what happens to prescription drugs when they go off patent and generic drug companies come in. The impact would be that the price of real Coke would fall a lot (probably not all the way to the price of the generic Coke knockoffs). This would clearly be terrible for Coke. It would probably also be bad for Pepsi. With Coke now much cheaper, people would switch from Pepsi to Coke. Pepsi profits would likely fall.

How much would Pepsi pay to get Coke’s secret formula? [Freakonomics Blog]

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