Sally Maven had advised many clients about pricing strategies over the years, but in the fall of 2023, she felt anxious about how to direct her newest customer, multinational brewer Anheuser-Busch (AB) InBev. Antitrust authorities had scrutinized AB InBev on multiple occasions in the past, and as a prominent player in the drink market, the company seemed like a possible target for future inquiry. Even if market circumstances warranted raising prices of AB InBev products, would doing so be wise given the potential for action by the Federal Trade Commission (FTC)? This case was written for use in Darden's global economies and markets (GEM) core course for a class on the economics of market power. The case helps students understand the differences in profit-maximization for firms in monopolistic and competitive markets while compelling students to think about various issues that can influence the ultimate price of a product. Using demand and cost schedules for AB InBev, students will need to calculate the firm's optimal price for a six-pack of beers under multiple demand scenarios. With the potential for FTC scrutiny in mind, students will need to consider whether to recommend a price that maximizes short-run profits or an amount closer to the competitive market price.
As he prepares for a 2023 meeting of General Electric Corp. (GE), Vladimiro de la Mora, president of GE Mexico, weighs the potential benefits and risks of nearshoring production to the Mexican border. Along with major ports that accessed both the Pacific and Atlantic Oceans and a 2,000-mile frontier shared with the United States, Mexico has a long history of trade and cooperation with the United States, supported by trade agreements and low labor costs, that have attracted low-skilled US manufacturing to Mexico for decades. But nearshoring is not without risks. Mexico has high inequality and low levels of human capital, and it is susceptible to political crises, populism, corruption, and insecurity, causing acute problems along the border with the United States. Reforms are needed. This public-sourced, partially fictionalized case offers an overview of Mexico's economic and political history since the 1970s, putting into rich context the opportunities and challenges encountered by a multinational company in 2023. It is taught at Darden in the second half of the Global Economics and Markets (GEM) sequence; it would also be suitable in a module covering long-run potential growth, economic fragilities, and economic crises.
This note works best when paired with two other Darden technical notes: ""The IS/LM Model"" (UVA-GEM-0126), and a note that directly supports this one, ""Determinants of Economic Growth"" (UVA-GEM-0202). This note provides a formal mathematical derivation to address recurring questions about the Solow model (see GEM-0202 for details). Using a detailed derivation that starts from the investment equation used in UVA-GEM-0126, it shows why population growth decreases capital per capita. Finally, it argues that productivity growth is the only path for a country to exhibit long-run output growth in per capita terms. Because this note uses mathematical tools to derive the Solow model, it is well beyond what is needed in an MBA program. It simply provides step-by-step derivations of the Solow model for interested readers.
Economic growth is a recent phenomenon in human history. This technical note explores this phenomenon in detail, examining the work of Nobel laureate Robert Solow, whose growth model is the dominant paradigm for practitioners when evaluating countries' growth prospects. For math-oriented readers, this note pairs well with a companion technical note, "Determinants of Economic Growth: Supplemental Note" (UVA-GEM-0204).