Question: Explain why mergers are always profitable in Differentiated Bertrand but are only profitable in Cournot provided cost efficiency gains are sufficiently large or markets are

Explain why mergers are always profitable in Differentiated Bertrand but are only profitable in Cournot provided cost efficiency gains are sufficiently large or markets are sufficiently concentrated. (ii) Explain why non-merging firms (i.e. outsiders) benefit from a merger in both Differentiated Bertrand and Cournot. (iii) Explain why merger waves occur in Cournot. (iv) Explain how elasticities determine the impact of the merger on mark-ups in Differentiated Bertrand.

2. (10 marks). Demonstrate the profit and welfare consequences of merger by solving the 'Cournot Mergers with Variable Cost Savings' model done in class for the parameter values indicated below. Cournot Mergers with Variable Cost Savings P = a - Q, Pre-merger: n firms, MC = c, FC = F Post-merger: n - 1 firms, Outsider MC = c, FC = F, Insider MC = c - x, FC = 2F Parameter values: a = 90, c = 30, x = 12, n = 4.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Part 1 Theoretical Explanation i Profitability of Mergers in Differentiated Bertrand vs Cournot Differentiated Bertrand In a Differentiated Bertrand model firms compete by setting prices rather than q... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...

CANMNMM January of this year. (a) Each item will be held in a record. Describe all the data structures that must refer to these records to implement the required functionality. Describe all the...

Write a literature review for your study. See below for an example of a literature review. Your literature review should provide both analysis and synthesis of previous studies as related to the...

1.With reference to the Staple and Heinz-Beech Nut cases, discuss the central issues of the anticompetitive arguments. Carefully discuss the circumstances under which mergers may be undesirable and...

With reference to the Staple and Heinz-Beech Nut cases, discuss the central issues of the anticompetitive argumen Proposed Merger between Staples and Office Depot Leads to Concerns of Higher Prices...

By MARK@ (Ruska, Markevichus, Naniev, Grachev) Emerging russian ice-cream market is good area for different producers as it has great potential 1. Currently Russian ice-cream market is the 4th...

Discuss these findings and comment on the implications of free cash flows from an agency theory perspective. Also discuss the relevance of these findings in the current business environment." in 300...

Discuss these findings and comment on the implications of free cash flows from an agency theory perspective. Also discuss the relevance of these findings in the current business environment."...

. Answer these questions. Be sure that your responses model clear economic reasoning and addresses each of the following: Question Part 1.) Consider the discrete Bertrand game described in the...

A Journal Article Review for " The interaction between technology, business environment, society, and regulation in ICT industries". 1. Write the Title that reflects the main focus of your work. ......

NOP instruction introduces a) Address b) Delay c) Memory location d) None of the mentioned

Why would ethical decision making be part of a sustainability management framework?

In a free - fall experiment, an object is dropped from a height of h = 5 7 6 feet. A camera on the ground 5 0 0 ft from the point ( a ) Find the position function that yields the height of the object...

7:50 PM P Edit Financial investment curing the year Established post salaries Custom and Excise duties Non-established post salaries 13% SSF contribution Transfer to the District Assembly Comman Fund...

Deprotonation of Luminol. Provide the complete mechanism that shows the deprotonation of the luminol zwitterion to form the dianion. You must include appropriate arrows, intermediates, and formal...

Shown are four Lewis structures for ozone (0,). Match each structure (on the left) with the correct response (on the right). A. 10-0-01 B. 10--i c. 10-0=0 D. 10=0=O Drag and dine optians an the rght...

Consider a system: " (t) y(t): y(t) = e-"r(t 2) -2t determine if the system is: a) linear b) causal c) invariant in time d) stable e) with memory

Concrete Creations manufactures concrete bird baths that are sold through retail outlets nationwide. The bird baths are made in a two-stage process. In the Forming Department, the concrete is poured...

6 Theory of Machines 5. A shaft carries five masses A, B, C, D and E which revolve at the same radius in planes which are equidistant from one another. The magnitude of the masses in planes A, C and...

Tastes for Cars and Product Characteristics: People buy all sorts of different cars depending on their income levels as well as their tastes. Industrial organization economists who study product...

The U.S. tax code subsidizes housing through a deduction of mortgage interest. For new homeowners, mortgage interest makes up the bulk of their housing payments which tend to make up about 25% of a...

Consider again, as in exercise 27.11, the political incentives for legislators that represent districts. In exercise 27.11, we considered pork barrel projects as publicly funded private goods that...

3 Prepare the functions f1(x) and f2(x) as objects number 1 and 2, and the VT x1, x2, x3, x4 as object number 3. A logic function is self-dual if and only if Prove this theorem, identify the number...

2 Prepare a VT x, y as object number 2 and solve the equation ds1 ds2 ds3 = 1 and store the result as object number 3. Calculate the stable states of the asynchronous finite-state machine given by...

3 Calculate F(s, ds) = max2( x,y) F(x, y, s, ds) as object number 4. Calculate the stable states of the asynchronous finite-state machine given by the following TVL in ODA-form Y $1 82 83 ds1 ds2 ds3...