MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Chapter 14, Problem 13PAA
To determine
To know:Whether SDC obliged to inform about merger or not.
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Assuming there are two companies selling personal computers,Company Jackfruit Computers and Company Mangoes Computer. They both have an inventory of personal computers that they would like to sell before a new generation of faster, cheaper machines is introduced. The question facing each competitor is whether or not they should widely advertise a “close out” sale on these discontinued items, or instead let excess inventory work itself off over the next few months. The net revenue to each firm in millions of $, is depicted in the payoff matrixbelow:
Mangoes
Jackfruit
Advertise
Don’t advertise
Advertise
M: $5
J: $5
M: $2
J: $20
Don’t advertise
M: $20
J: $2
M: $10
J: $10
1. Determine the dominant strategy for each firm
2. Would collusion work in this case? Explain.
Suppose the European Union (EU) was investigated and proposed a merger between two of the largest distillers of premium Scotch
liquor. Based on some economists' definition of the relevant market, the two firms proposing to merge enjoyed a combined market
share of about two-thirds, while another firm essentially controlled the remaining share of the market. Additionally, suppose that the
(wholesale) market elasticity of demand for Scotch liquor is -1.9 and that it costs $16.90 to produce and distribute each liter of Scotch
Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium
Scotch liquor.
Instructions: Do not round Intermediate calculations. Enter your final responses rounded to the nearest penny (two decimal places).
Pre-merger price: $ 19:43
Post-merger price: $
23.02
Suppose the European Union (EU) is investigating a proposed merger between two of the largest distillers of premium Scotch liquor. Based on some economists’ definition of the relevant market, the two firms proposing to merge enjoyed a combined market share of about two-thirds, while another firm essentially controlled the remaining share of the market. Additionally, suppose that the (wholesale) market elasticity of demand for Scotch liquor is –1.3 and that it costs $16.20 to produce and distribute each liter of Scotch. Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium Scotch liquor. In light of your estimates, are you surprised that the EU might raise concerns about potential anticompetitive effects of the proposed merger? Explain carefully.
Chapter 14 Solutions
MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
Ch. 14 - Prob. 1CACQCh. 14 - Prob. 2CACQCh. 14 - Prob. 3CACQCh. 14 - Prob. 4CACQCh. 14 - Prob. 5CACQCh. 14 - Prob. 6CACQCh. 14 - Prob. 7CACQCh. 14 - Prob. 8CACQCh. 14 - Prob. 9CACQCh. 14 - Prob. 10CACQ
Ch. 14 - Prob. 11PAACh. 14 - Prob. 12PAACh. 14 - Prob. 13PAACh. 14 - Prob. 14PAACh. 14 - Prob. 15PAACh. 14 - Section 16(a) of the Securities and Exchange Act...Ch. 14 - Prob. 17PAACh. 14 - Prob. 18PAACh. 14 - Prob. 19PAACh. 14 - Prob. 20PAACh. 14 - Prob. 21PAACh. 14 - Prob. 22PAACh. 14 - Prob. 23PAA
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