Peter McCluskey wrote:
Ok, that's a reasonable point. I guess it comes down to how serious these
are as entry threats? If they don't have much of a chance of beating Intel
or Microsoft, then it's a shame to impose great inefficiency on current
customers merely to increase a small chance of a competitor beating them.
> >What might make a difference would be if merging substantially reduced
> >the ability of competitors to contest either the chip or OS market.
> >This doesn't sound very plausible to me on first glance, however.
>
>I find it easy to imagine that the merged company would be much less likely
>to cooperate with AMD about problems AMD has with running Microsoft software,
>and with Linux/FreeBSD developers about problems they have adapting their
>software to new chips.
> >are sold by separate monopolists, then P = PX + PY and each
> >monopolist does something like
> >
> > max (PX - CX) * D(PX + PY)
> > PX
> >
> >Where CX is the cost of making X. If the two firms are
> >merged, then together they
> >
> > max (P - CX - CY) * D(P)
> > P
> >
> >This leads to both a lower price P, and more profits. QED.
>
> I don't see how this conclusion follows from the analysis you presented.
The FOC of the first max gives 0 = D(P) + (PX-CX)D'(P) and 0 = D(P) + (PY-CY)D'(P) . Added together gives 0 = 2D(P) + (P-CX-CY)D'(P) .
The FOC of the second max gives 0 = D(P) + (P-CX-CY)D'(P) .
Robin Hanson rhanson@gmu.edu http://hanson.gmu.edu
Asst. Prof. Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030
703-993-2326 FAX: 703-993-2323