Answer the questions below for one of these proposed mergers (you choose which one): Staples/Office Depot(1997,not 2015), Aetna/Humana, American/USAir.

Please explain and document your answers.

(a)

Each of these mergers was challenged in court. What were the main points made by the antitrust

agency for the merger you chose? Please cite the relevant portions of the antitrust agency's complaint

(b)

What arguments did the firms use in their defense?

(c)

What was the final outcome? (Was the merger allowed to go ahead? If so, what remedies were imposed?

If not, why could the parties not come to an agreement with the antitrust agency? Etcetera.)

#2

Suppose that you were analyzing the merger between two beer brewers. Suppose further that all brewers

sell a single variety/brand of beer, noting that in reality brewers each sell a number of different varieties of

beer (e.g. Yuengling Premium verus Yuengling Lager). Focus on retail sales of cases of 24 bottles of beer and

ignore the presence of other package sizes or distribution channels and bars, restaurants, and hotels. You

have data on prices and volumes of all beer products sold in the market and formulate a multinomial logit

model. Note that i now corresponds to a consumer making a decision at some point in time whether or not

to buy a case of beer. So N is the number of times a consumer somewhere in the market makes the decision

whether or not to purchase which case of beer in a given time period.

Continue using the information that you

collect along the way.

(a)

What is the role of the outside good here?

(c)

Would the independence of irrelevant alternatives issue be of concern here? Please explain brie

fly.

(e)

Suppose that the Lerner index for brand 1 is 5/12

. What would be the own price elasticity for brand

1?