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FREE POWERPOINT MERGER PC
FREE POWERPOINT MERGER FREE

This will then lead to a rise in profits.Lower number of firms leads to an increase in market power.

Larger firms will have easier access to capital.If M > K-n, equilibrium takes the form of Edgeworth cycles.If K-n > M, any (n-1) firms can cover the whole market, so we have pure Bertrand competition.If M > K, competition is not effective and firms charge monopoly prices.Let K be the sum of individual firm capacities ki, where k1ki.Let M be the total number of consumers and assume each consumer demands one unit of a homogenous good.A firm may not be able to serve the entire market, even if it charges the lowest price.If two companies merge, they will have a larger portfolio of products with which to compete.This means that some consumers may prefer a given product, even if it is more expensive.1: Sports cars (Ferrari, Porsche, Bentley…) Firms often sell differentiated products.Essentially, in this framework, mergers merely result in reducing the number of competitors in the market.The merger has different impact on the different firms:.The model basically says that if firm A buys firm B, it basically shuts that firm down and works as if it did not exist.So, what happens if there is a merger in a Cournot market?.Consequently, this means that as n rises, so does CS.

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Also, as n -> infinity, the output produced by all the firms approaches the PC output (and price).

From the expression above, it is easy to see that if n=1, we have the monopoly output.

If all firms make the same quantity decision simultaneously, we find that the equilibrium output is equal to:, where.

Firms maximize their profits, given what their opponents do:.

Unlike PC, it is reasonable to assume that what a firm does has an impact on what its rivals do.

Most markets have a relatively small number of firms that compete for a share of the market.

Neither perfect competition nor monopoly are realistic models of the world it’s best to think of them as benchmarks.

Let’s meet in the middle: Cournot competition

One firm, no entry, firm sets price to maximize profits (Q=(a-c)/2b).

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“Atomistic”, price-taking firms, free entry and exit and perfect information.Last week we started the class by looking at two extreme cases:.Motta (2000) – available online on the course website.