Brain and Company is a consulting group that offers a foolproof pricing and revenue optimization service guaranteed to deliver $2 million in benefit to a customer. It costs Brain and Company $500,000 to provide this service. Unfortunately, Brain has a competitor, Dissenture, that provides a similar, but somewhat inferior, service that only delivers $1.5 million in guaranteed benefit. It also costs Dissenture $500,000 to provide this service.

a. When competing with Dissenture, what price does Brain and Company need to charge to guarantee that it wins the business? Assume that neither Dissenture nor Brain will price below cost and that both of them know each other’s costs and the customer benefits in each case.

b. How would Brain’s price need to change if it only cost Dissenture $400,000 to provide its service?