If you have any questions that aren't addressed here, post a thread in the forum.

Question 1

  • For part (a), answers should be given for BCG's staffing level, price, and profit. Note that because the problem is symmetric, these results will also hold for McK.
  • For part (c), you may assume that BCG will obtain the same benefits from licensing C-Suite as McKinsey gets (i.e. lower cost function).
  • For part (c), you should assume that each firm incurs the $100M annual cost to maintain their (separate) databases. Thus, both firms have the same cost function for use in calculating their pre-licensing-fee profits.

Question 3

  • The cross-price terms in the demand functions for Sony and Microsoft should be the same, per the intuition given in Lecture 3. An updated version has been posted to Canvas at https://www.dropbox.com/s/jvikvdxujj4rsch/MGEC%20612%20Problem%20Set%201%20%28no%20solutions%29.pdf?dl=1
  • If you haven't yet started the problem, please solve the updated version. However, if you've already solved the problem with the old demand functions (which is mathematically possible although it doesn't make sense from an intuition perspective), you will also receive credit - no need to redo your solution.