Consider a differentiated Bertrand market with three firms. The demand curves for Firms 1, 2, and 3 are below. Q1 = 300 – 10P1 +

Consider a differentiated Bertrand market with three firms. The demand curves for Firms 1, 2, and 3 are below. Q1 = 300 – 10P1 + 3P2 + 2P3 Q2 = 300 – 8P2 + 2P1 + P3 Q3 = 50 – 3P3 + P1 + P2. Firms 1 and 2 both have marginal costs of 10, and Firm 3 has a marginal cost of 15. A. Calculate the UPPIs for the merging parties, i.e., Firm 2 and Firm 3. Assume that cognizable efficiencies cause Firm 3’s marginal cost to fall from 15 to 10. Do these UPPIs give cause for concern about potential harm to competition? B. Suppose that you do not know that these three firms have the linear demand curves shown above. You only know prices, margins, and market shares for each firm. Assume that they have the values that you calculated in parts (a) and (b) above. You assume (incorrectly) that these prices, margins, and shares were produced by a market with logit demand curves. How would this mistaken assumption affect the UPPI calculations?

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