Q1. 10 marks). Explain how RPM can be used to increase retailer demand for inventories and thereby increase manufacturer profit. Explain whether profitable RPM can either increase or decrease welfare and how this depends on the variation in demand. Use diagrams and verbal explanation to explain your answer. Demonstrate the profit and welfare consequences of RPM by solving the 'RPM and Inventories Model' model done in class for the parameter value indicated below. RPM and Inventories Model Manufacturer MC = 0, Dealer MC = 0, Low and high demand are equally likely Low demand: qL = 1 - pL, High demand: qH = S(1 - pH) Parameter value: S = 4. (NOTE- to solve the question please do no rpm case with competitive dealers and rpm case with competitive dealers and then compare profits and welfare to determine whether rpm is profitable and increases welfare and explain in detail)

Q2. (10 marks). Demonstrate the profit and welfare consequences of merger by solving the 'Cournot Mergers with Variable Cost Savings' model done in class for the parameter values indicated below. Cournot Mergers with Variable Cost Savings P = a - Q, Pre-merger: n firms, MC = c, FC = F Post-merger: n - 1 firms, Outsider MC = c, FC = F, Insider MC = c - x, FC = 2F Parameter values: a = 90, c = 30, x = 12, n = 4 (NOTE- explain in detail)

Q3. (10 marks). Explain why vertical mergers in successive oligopoly are profitable and under what circumstances they give rise to foreclosure effects. Solve the "Vertical Mergers in Successive Oligopoly" model done in class for the parameter values indicated below and verify that vertical merger is profitable and indicate whether or not foreclosure has occurred.. Vertical Mergers in Successive Oligopoly P = a - Q Integrated firm MC = 0, Non-integrated dealer MC = w, Non-integrated manufacturer MC = 0 Pre-merger: nI integrated firms, n nonintegrated dealers, m non-integrated manufacturers Parameter values: a = 120, nI = 3, n = 2, m = 2 (NOTE- explain in detail)