Peter McCluskey wrote:
The question is how much this threat would be reduced by a merger. Merged
threats, such as Apple offered bundling its OS with Motorola chips,
would still be feasible.
> >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.
>
>I'm fairly confident that an independant Intel would be beaten if it
>priced chips as if it had a full monopoly, and I suspect this competitive
>pressure has an effect on prices that is comparable to the benefits of a
>merger.
> >These are tradeoffs between the advantage of raises prices
> >on the consumers you have (the first term) and the advantage
> >of lowering prices to get more consumers (the second term).
> >The first max puts twice as much weight on the first term. QED?
>
> Ok. If I thought they were acting as if there was negligible competition,
>I would agree with your conclusions.
I have a paper in front of me arguing that we should encourage/allow movie producers to merge with theatre firms. Firms in these industries have enough market power that merging could lower prices by up to 30% and therefore increase sales by a factor of two, or so this paper says.
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