You are a member of your State Antitrust Commission. Two price competing firms (Bertrand), who enjoy constant returns to scale, supply electric power (a homogeneous product). There is no cost advantage of one firm over the other. Now, these two firms are asking for permission to merge on the basis that joint exploitation of the distribution network will reduce their marginal cost by, for instance, 5%. Using graphical analysis explain under which conditions would you grant permission for the merger to occur. Could this merger lead to a Pareto dominant solution in the sense that both consumers and power companies improve relative to the pre-merger situation? (There is more than one possibility here!)