This year’s essay assignment is split in four sections. Your task is to solve THREE OUT OF THE FOUR of the following problems using the knowledge acquired in class in combination with your own research. Each of the three sections you choose carries equal weight in the determination of the final mark for the essay:
SECTION ONE
After you took care of the airport demand project successfully, your line manager puts you in touch with a potential new client. You travel to Seoul to meet the director of sales of one of the largest shipbuilders in the world, which specializes in container ships. He tells you that the company has recently invested in a massive expansion of its main shipyards with the objective to build even larger container ships in the future. He then shows you a BBC article on the topic (see reading list below) that many of his clients refer to during their meetings. From a marketing perspective, he is concerned about the validity of one of the most important selling strategies he has used in the past: convincing his clients (the shipping companies) to operate bigger ships to exploit economies of scale and achieve lower average operating costs. The question he wants the project to answer is: are these economies of scale exhausted now or are there still cost advantages to be gained by operating even bigger ships? In order to win this contract, prepare a short report (approx. 650-700 words) in which you briefly explain the main sources of economies (or diseconomies) of scale in container ship operation with explicit indication on which source you think are most important to answer the question above. Since this person seems to place great value on the BBC article, you may also want to append some calculations with the data provided in the article to win him over.
Essential Reading:
BBC News (2013) How much bigger can container ships get?
www.bbc.com/news/magazine-21432226
Cullinane and Kanna (1999) Economies of Scale in Large Container Ships. Journal of Transport Economics and Policy 33 (2), 185-207
www.bath.ac.uk/e-journals/jtep/pdf/Volume_33_Part_2_185-207.pdf
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SECTION TWO
Your next client is a large electronics manufacturer that wants to enter the emerging Virtual Reality market with their own headset, aimed primarily to gamers. You work within a team of five colleagues with the objective of carrying out a competitive analysis for said hypothetical product. You are assigned the task of exploring barriers to entry in this market. Prepare a short report (approx. 650-700 words) that summarizes your main findings, with explicit indication of real-world firms and products to illustrate your points.
Essential Reading:
CNET (2015) Samsung, Facebook’s Oculus plan November launch for Gear VR headset, at $99
http://www.cnet.com/news/samsung-and-facebooks-oculus-sets-launch-for-gear-vr-headset-in-november-for-99/
Besanko et al., Economics of Strategy. Chapter 9 (“Entry and Exit”)
Also, please DO NOT contact any company directly.
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SECTION THREE
You have now left Edinburgh and moved to the States to pursue a career as an economic consultant for a very prestigious Law firm. During the selection process, they ask you to prove your knowledge with the following task: “Assume that, two decades ago, you were counselling the US Department of Justice in the historical $100 million case against the lysine cartel for price-fixing”. Write a short report (approx. 650-700 words) summarizing the arguments for the prosecution in clear economic terminology: a) are the suspicions of price-fixing supported by the economic theory?; b) can you identify any practices that would facilitate collusion in this case?” In the process of writing this report, you also find out that the defence lawyers of the accused companies also employed economic consultants to provide testimony. You reckon that c) if you also come up with a good economic answer to the defence arguments, and include it in the report, this job will surely be yours.
The Law Firm does not give you any readings. They want to see if you are able to find your own sources.
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SECTION FOUR
Finally, you get tired of being an economic consultant and got a job as the pricing manager of the Pear Company. Solve the multi-version part of the “Pearwatch” exercise from the pricing tutorial and summarize your method and conclusions in a short report for the CEO (approx. 650-700 words plus tables). The specific questions that you must answer in the report are: should the Pear Company offer more than one version of the smartwatch? If so, which versions? At what prices? It is important to note that the CEO will not accept any recommendation that is not supported by numerical data.
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You can provide tables, figures, pictures, screenshots, and appendices (if necessary) to support your arguments. These contents will not be part of the essay’s word count. You are also expected to look for your own additional references, which can include academic papers, industry reports, press releases, legal documentation, online videos, and other sources. A single list of references for all three sections must be provided at the end. Formatting and presentation will also be taken into account for the final mark.
Maximum essay length: 2,000 words