I need answer for the third sub question thanks ider the air

I need answer for the third sub question thanks

ider the airline oligopolistic industry with two firms (carriers), A and B. Let the inverse demand the same total cost equal to TC- 4q, where i-A, B) 1) Compute the market equilibrium, assuming that the two firms simultaneously choose their output levels. As decision variables, are quantities strategic substitutes or complements and why? 2) Assume now the following timing of the game: at time 1, firm A chooses its output, at time 2 firm B chooses its output. Compute the market equilibrium. Which of the two firms has the advantage? Explain your answer 3) Assume now that the two firms decide to merge. In this case, the merging process requires an administrative cost equal to 2, independently of the quantities the two firms produce before or after the merger i) Do firms A and B have incentive to merge in case 1) above? i) Do they have incentive to merge in case 2) above? Which firm administrative cost for the merger to be accepted by both parties in this case? ili) Return to case 1) (in the absence of merger the two firms play simultaneously) and assume that the two firms contemplate a merger that will reduce the marginal cost cf the merged entity to 1, due to synergies. Should a Competition Commission allow this nction given by the equation p 10-Q, where Q qa+ qB. Firms face merger to occur? Explain your answer

Solution

As the merger due to synergies is reducing the marginal cost of the merged entity the competitive Commision should allow the merger. The reason is followed by the fact that Synergy is the force that allows for increased cost efficiencies of the new business as well a reason to justify the transaction. As the merging companies hope to benefit from the Staff reductions, Economies of scale and obviously reduced marginal cost, which will in return help to benefit competition and consumers by allowing firms to operate more efficiently.