1. 2K Games, Inc, is a monopoly producer of Sid Meier's Civilization series of games. You are hired by Sid Meier, its creative director, to help the company price a new edition of the game, Civilization VIII, due to be released in 2023. Consistent with Sid Meier's vision, the new game has one third of existing features, another third of improvements from the previous version, and the remaining third introduces new features. This approach, in Sid Meier's view, allows to sell the game both to existing fans and to reach out to new players. The company has estimated that there are 20 million "fans", each willing to pay up to $45 for a box version. In addition, there are 50 million "novices" who are also interested in trying a Civilization game, and their willingness to pay for a box version is $15. The box version has a marginal cost of production equal to $5. a. How would you price the box version? How many copies would you sell and what would be your profit? The CEO of the company reaches out to you to clarify something important. He says that while the estimates for the numbers and types of customers and their willingness to pay for the box edition are all correct, the company cannot sell Civilization VIII like it is 1991 (the year the first Civilization was released). Specifically, it should make a version available for download. The marginal cost of a download would be essentially zero, and they estimate that fans would be willing to pay up to $20 to download the game, and novices would be willing to pay up to $10. b. How would you price the download version? How would you price the box version?

c. When you come to the CEO's office with the pricing plan, you find the CEO looking quite shocked and embarrassed. He explains to you that when he mentioned to Sid Meier his estimates about the fans' willingness to pay for the download version, Sid Meier became livid and went on to explain, quite convincingly that a true fan of Civilization would be willing to pay at least $30 for a new version, even it is download only. So you are asked to redo the calculations and suggest how to price the download version and the box version. d. A week after making your recommendation in part c, Sid's nephew, who is also a board member at 2K Games Inc. sends you an urgent email. According to the latest estimates, there are actually 30 million novices interested in purchasing Civilization VIII. He informs you that uncle Sid would appreciate it if you could reevaluate the pricing of the download and box version of the product.