Problem 14.2.6

In 2012, the U.S. government sued to block the world's biggest beer maker, Anheuser-Busch InBev, from buying Mexico's Grupo Modelo (which manufactures Corona and other beers) for $20 billion (Brent Kendall and Valerie Bauerlein, "U.S. Sues to Block Big Beer Merger," Wall Street Journal, January 31, 2013). Currently, Anheuser-Busch InBev has 39% of the U.S. beer market, MillerCoors has 26%, and Grupo Modelo has 7%. When the suit was announced, both firms' stock prices dropped sharply. Why?

Problem 14.3.13

A duopoly faces an inverse market demand function of p = 120 - Q. Firm 1 has a constant marginal cost of 20. Firm 2's constant marginal cost is 40. Calculate the output of each firm, market output, and price in (a) a collusive equilibrium or (b) a Nash-Cournot equilibrium. (Hint: See Solved Problem 14.1.) M