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Question 35 (8 points) Staples and Office Depot are two large office supply companies that have asked the Justice Department for permission to merge on
Question 35 (8 points) Staples and Office Depot are two large office supply companies that have asked the Justice Department for permission to merge on two occasions, first in 1997 and second in 2013. Back in 1992, the combined market share of the two firms would be 70. The next highest company had only 5% market share. a. The companies were denied each time. According to the simple US Dept of Justice rules, should their requests to merge have been allowed? Why or why not? (2) b. What has changed regarding competition in the market since 1997? Would the change in the HHl resulting from a merger in 2013 be higher or lower than the change in 1997? Why? (3) c. Two other firms, Bayer and Monsanto, two important companies working in seed development with substantial research and development costs, were allowed to merge despite the HHI for some products rising to 9.800. They argued that margining could result in lower prices. Would this argument work as well for Staples and Office Depot? Why or why not? (3)
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