Exercise 4: Elimination of double margins in vertical mergers - Which of the below three vertical mergers do you think is likely to lead to an elimination of double margins? Briey explain why, in your own words. - Merger 1: Firm A sells an indispensable input to Firm B, which in turn sells a final product to consumers. Firm A charges a fixed fee of 10m to Firm B for the right to use its input, and an additional 50 per unit that Firm B requires, which is above the marginal cost to Firm A of 10. Firm A and B merge. - Merger 2: Firm A licenses an indispensable patent to Firm B. Firm A only charges a fixed fee of10m to Firm B for the right to use this patent. Firm A and B merge. - Merger 3: Firm A is an upstream provider that only sells to downstream Firm X. It sells this product at a per-unit cost of10. Firm X in turn competes in the downstream market with Firm Y, who gets its input from upstream Firm B at a per-unit cost of 12. Firm A and Firm Y merge