Problem 2. Consider an industry with demand Q = a -p where 3 identical firms that compete a la Cournot. Each firm's cost

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Problem 2 Consider An Industry With Demand Q A P Where 3 Identical Firms That Compete A La Cournot Each Firm S Cost 1 (30.84 KiB) Viewed 11 times

Problem 2. Consider an industry with demand Q = a -p where 3 identical firms that compete a la Cournot. Each firm's cost function is given by C=F+cq. Suppose two of the firms merge and that the merged firm's cost function is given by C=F+dq, where F<F' <2F. 'Check: https://www.justice.gov/atr/15-concentr ... ket-shares 1 (a) Determine each firm's market share before and after the merger. (b) Suppose that a = 10 and c = 3. Determine the Herfindahl index after the merger takes place when (i) c = 2 and (ii) c = 1. Compare this to the post-merger Herfindahl index calculated based on pre-merger market shares.