question archive Consider the following potential merger
Consider the following potential merger
Subject:EconomicsPrice: Bought3
Consider the following potential merger. Firm A sells its product for $100 and has marginal cost of $60 and sells a quantity of 100 units. Firm B sells its product for $80 and has marginal cost of $40 and sells a quantity of 100 units. The diversion ratio from A to B is 0.2. Calculate the value of diverted sales expected if these firms merge. What is the GUPPI? Is this merger likely to receive additional scrutiny for potential unilateral effects? If the merger is likely to generate efficiencies, how large must any cost savings be to alleviate concerns of unilateral price effect?
