__. Assume that there are two firms in a given market, X and Y. Let the...

 

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__. Assume that there are two firms in a given market, X and Y. Let the inverse demand function be given by P = 6 - 4Q. The pre-merger cost function for each firm is identical and is given by C₁ = 4Q₁. After the merger, the new firm XY will be more efficient with the cost function Cxy = 40Qxy, where 0 ≤ 1. Assume that before the merger, the companies behave as in the Bertrand model (price setting), and after the merger there is only one firm, i.e., the standard monopoly behavior prevails. The Competition Authority (CA) allows the merger only if the consumer surplus increases. Find the value(s) of 0 that the CA will allow for the merger. __. Assume that there are two firms in a given market, X and Y. Let the inverse demand function be given by P = 6 - 4Q. The pre-merger cost function for each firm is identical and is given by C₁ = 4Q₁. After the merger, the new firm XY will be more efficient with the cost function Cxy = 40Qxy, where 0 ≤ 1. Assume that before the merger, the companies behave as in the Bertrand model (price setting), and after the merger there is only one firm, i.e., the standard monopoly behavior prevails. The Competition Authority (CA) allows the merger only if the consumer surplus increases. Find the value(s) of 0 that the CA will allow for the merger.

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The Competition Authority CA will allow the merger only if the consumer surplus increases This means that the CA will only allow the merger if the fol... View the full answer