Consider two independent firms, bu1 and bu2, which initially transact with each other through spot market transactions in a competitive market. In a typical year, bu1 incurs total costs of $2 million in producing goods that bu2 buys. Bu2 would be willing to pay $7. 5 million for these goods. The two businesses then decide to enter into an exclusive long-term contract. Due to lower sales and marketing expenses, the total costs incurred by bu1 under the long-term contract fall to $1. 5 million. The better product quality resulting from closer cooperation between the two businesses increases the amount bu2 is willing to pay to $9 million. What is the synergy created by the exclusive long-term contract?.