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.
In this article, adapted from the forthcoming book Shocks, Crises, and False Alarms, the authors explain how economic analysis works in the real world. They lay out three principles for navigating the rising number of economic risks: (1) Don't put too much stock in any one economic model. (2) Ignore the doomsayers in the financial press. (3) Cultivate rational optimism and an eclectic form of judgment that draws on multiple sources. That involves identifying the critical drivers of potential risk, building a narrative, and pressure-testing it from multiple perspectives. The "dismal science" of economics and our clickbait culture of public discourse are a perfect match to fuel simplistic narratives of doom. To avoid false alarms and achieve a true assessment of macroeconomic risks, the authors write, leaders should look past both to reclaim their own judgment.
In November 2017, Students for Fair Admissions Inc. filed a complaint alleging that Harvard College violated Title VI of the Civil Rights Act, which prohibited racial discrimination in institutions that received federal funding. The complaint alleged that Harvard College engaged in intentional discrimination against Asian American applicants in its admissions process. Harvard College acknowledged its use of race in the admissions process but maintained that it was only one of many factors the school considered. It also claimed that using race as a "plus factor" was supported by the law. Both sides used a large set of data to plead their cases and both hired econometrics experts to argue their positions, who reached opposite conclusions. The trial judge needed to assess the two experts' findings and reach a decision about the story the data was telling.
In March 2021, the founder of Hampstead Tea, a specialty-tea processor based in London, United Kingdom, found herself at a crossroads. Since 1995, the founder had been exporting packaged tea to countries in the European Union (EU) as well as selling it locally in the UK market. But effective December 31, 2020, the United Kingdom had exited the EU; in 2021, companies in the two regions could no longer buy and sell goods freely across their borders. Uncertainty had gripped the flow of trade during the first three months of the new year. In March 2021, the founder was examining three options going forward: (1) divest the EU operations and focus on the UK market; (2) continue to cater to both the home market and the UK market, as before; and (3) relocate to a geography within the EU to focus on EU markets. The case offers a useful and engaging way of presenting to students the principles of effectuation as it relates to business entrepreneurship.
In the spring of 2019, Grant Robertson, New Zealand's finance minister, was in the process of developing New Zealand's first-ever Wellbeing Budget. The prime minister of New Zealand, Jacinda Ardern, had spoken publicly about her vision to rethink how the government identified and set its priorities. Ardern was poised to push against a decades-old practice of using a country's gross domestic product (GDP) as a proxy for the well-being of its citizens. Consequently, Robertson was tasked with developing a new budget that addressed growing concerns about the need for more holistic well-being metrics. What nuances of life in the modern world did GDP miss? What would it mean for New Zealand to place less emphasis on GDP when making policy decisions? What should be measured and included in the Wellbeing Budget in place of GDP?
The case centres on the pricing and business model challenges facing Peloton Interactive Inc.'s new CEO, Barry McCarthy. With the decline in demand post-pandemic, McCarthy must make pricing and product decisions that balance revenue, profitability, and changing consumer dynamics. The case prompts students to assess McCarthy's options through a behavioural lens, considering the importance of behavioural biases in consumer decision-making and the alignment of the business model and marketing efforts with the target consumer's decision-making process.
This case, described as the last big merger in the global beer industry, involves a valuation of the merged company using a basic discounted cash flow (DCF) methodology. Students are asked to calculate and compare the value of the merged entity with the standalone valuations of the respective companies to see if there is indeed value in merging. An additional consideration is the impact of a large net cash position on the company's stock price when growth stalls.
This case focuses on the challenges of the public provision of high-quality water in Hungary, a high-income, former Eastern Bloc country that has been a member of the European Union since 2004. It struggles with chronic groundwater arsenic contamination. At the Darden School of Business, this case is taught in the second-year elective, "Global Economics of Water," in a public policy module that covers two topics: supplying water for the public and water markets. It is taught alongside "Deadly Wells in Bangladesh" (UVA-GEM-0158), to compare and contrast Hungary's arsenic contamination issues and solutions to those of Bangladesh, a lower-middle-income country and one of the most populated in the world.
This note presents an open-economy macroeconomic model with three panes: IS/LM, international capital flows, and the exchange rate and net exports. It also includes extensions: full employment and the evolution of prices, fixed exchange rates, and FX intervention. This note is appropriate for use in a first-year MBA course that deals with international economics.
This note presents frameworks and indicators for identifying fragile economies. It includes an assessment of Morgan Stanley's Fragile Five call in 2012 as well as current fragilities data for a range of economies. This note is appropriate for use in a first-year MBA course or an advanced undergraduate- or master's-level course that deals with international economics or finance.
In May 2022, India's retail inflation rate rose above the upper limit of the target range set by the Reserve Bank of India in 2015, to reach 7.79 per cent. In recent years, India's retail inflation rate had been successfully kept within the target range of 2-6 per cent as the economy grew steadily. Everything changed in March 2020, however, when the outbreak of the COVID-19 pandemic disrupted the economy of all countries around the world. In February 2022, two years after the outbreak of the pandemic, Russia invaded Ukraine, which further disrupted the global supply chains. As a result, all major economies had to closely manage their monetary policies with contractionary measures and use policy rates to contain inflation. Eventually, by March 2023, the inflation rate in India dropped to 5.66 per cent, within the target range. The Reserve Bank of India's governor had paused the rate hike in April after noticing that high interest rates were adversely affecting investments and growth prospects in the Indian economy. He knew that he had to continue using contractionary monetary policies but could not lower the policy repo rate, when inflation across major economies such as the United States and the United Kingdom were showing no signs of calming. He could choose to increase or keep the repo rate unchanged. Alternatively, he could choose a contractionary measure such as quantitative tightening.
In late 2022, a difficult period for the cryptocurrency industry persisted, marking the middle of what many considered a "crypto winter." Popular tokens and currencies like Bitcoin and Solana lost over 50 per cent of their value, with other Web 3.0 adjacent technologies following the same path. Debate surrounded the industry at large, and the US Securities and Exchange Commission (SEC) flexed its regulatory muscle on a "poster boy" non-fungible token (NFT), Bored Ape Yacht Club (BAYC), in efforts to provide more structure to the NFT market. The chairman of the SEC, Gary Gensler, who was extremely knowledgeable in the crypto space and also considered a tough regulator among the community, had to determine how to classify BAYC. Ultimately, questions surrounding BAYC's legal interpretation were being posed in the SEC's investigation: Should BAYC be regulated as a security? Were investors protected? Should NFTs be considered art? Did BAYC violate security regulations? As one of the leading representatives of the entire $2 trillion crypto industry, the potential regulation of BAYC had major implications for its peers, the underlying technology, and a spectrum of investors.
In 2001, the economies of Brazil, Russia, India, and China (BRICs) were predicted to grow faster than many others; this prediction turned out to be true. In this technical note, the challenge is to identify the new BRICs in 2023. Students will investigate the following questions: What are the economics behind BRICs? How do investors and managers identify the next BRIC countries (i.e., the next high-growth economies)? Could the economic frameworks underlying BRICs analysis provide some clarity after the fog of the COVID-19 pandemic and war in Europe? This note includes a short explanation of the Solow growth model, an exploration of growth factors not considered in that model, and data for emerging-market economies in 2000. Finally, it offers a range of perspectives on growth factors and suggests an updated analysis of growth prospects and possible new BRICs in 2023. At the Darden School of Business, this note is taught in the first-year core GEM course and used in the Global Financial Markets course.
This note presents an abridged description of balance of payments (BOP) and international investment position (IIP) data. It refers to data for Mexico, but given that there are worldwide standards for countries that report BOP and IIP, it provides guidance for understanding the data of just about any country.
DNB Asset Management (DNB AM), which is based in the Nordic region, has introduced responsible investment strategies across its asset classes. In addition to funds and investments that follow responsible investment standards, DNB AM offers clients an assortment of sustainability-themed funds, including funds that invest in businesses tackling climate change. In May 2020, DNB AM introduced a new theme-sustainable oceans-which focused on eight sectors: Aquaculture & fisheries/seafood, Offshore oil & gas, Renewable marine energy (e.g. wind), Marine transport & shipping, Ship recycling & marine operations (inc. port acctivities), Deep-sea mining & marine-based biotechnology, Marine & costal tourism and Land-based activities with a significant influence on the oceans (e.g. mining, agriculture, chemicals, waste management and urban development).
The case, "Suez and Veolia in Hot Water," takes the merger between Suez and Veolia, the two largest global water and waste multinationals, as a starting point and puts it in the context of the ongoing discussion in France (and elsewhere) about remunicipalizing utilities, especially water and wastewater. The broader background of the case narrative constitutes, on the one hand, the water infrastructure crisis in many advanced countries, and, on the other, the challenges the water sector faces due to climate change. The emphasis of the case discussion is on the economic analysis of private-public partnerships (PPPs). These partnerships between the public and the private sectors are not trivial in the context of water infrastructure, especially because water utilities tend to be natural monopolies and because water is a good that has both a private and a public dimension. Suez and Veolia in Hot Water" is taught at the Darden School of Business in the MBA "Global Economics of Water" course. The case belongs in the policy module, which follows cases about and discussion of the global and climate-change context of water. The policy module focuses on water utilities and water markets. The case can also easily be taught on its own, as it deals with PPPs, which have been receiving quite a bit of attention lately.
The case profiles the development of cluster-based economic development activities in Catalonia, one of Spain's most prosperous regions, over the last thirty years. It describes the evolution of these activities between 1990 and 2022 and puts these changes into the context of the broader evolution of Catalonia's economy. The case is targeted at students that want to understand the nature of cluster-based economic policies, either from the perspective of policy makers or of business leaders faced with such efforts. It is relevant for a broader set of location-based sectoral industrial policies, a tool that has recently gained significant new traction. These policies aim to enhance the competitiveness of specific sectors in distinct locations and are implemented through public-private collaborations.
This case, a follow-up to "Light Rail in Denver?: The Private Sector and Infrastructure Development (A)" (UVA-GEM-0188) revisits Nwanneoma "Neena" Ngondai as she reflects on the work of the Denver Regional Transportation District and what actually happened after the proposed expansion of Denver's public transit system.
In the rush to develop vaccines, many strains of viruses are used in laboratories in an effort to help humanity. However, the same samples used to develop life-saving vaccines could potentially be used to develop weapons of biological warfare. This case looks at the scenario from multiple perspectives in an effort to discuss the ethics of virus usage, storage and regulatory oversight given the differing economical situations and motivations of the actors.