Does the merger result in increased prices

Assignment Help Financial Accounting

Reference no: EM13148281

In February 2005, the US Federal Trade Commission (FTC) went to court to undo the January 2000 takeover of Highland Park Hospital by Evanston Northwestern Healthcare Corp. The FTC accused Evanston Northwestern of antitrust violations by using its post-merger market power in the Evanston hospital market to impose 40% to 60% price increases. Hospitals, even within the same community, are geographically differentiated as well as possibly quality differentiated. The demand for an appendectomy at Highland Park Hospital is a function of the price at Evanston Northwesters Hospital q(H) = 50 -0.01p(H) + 0.005p(N). The comparable deman function at Evanston Northwestern is q(N) = 500 - 0.01p(N) + 0.005p(H). At each hospital the fixed cost of the procedure is $20,000 and the marginal cost is $2,000. a) Use the product-differentiated Bertrand model to analyze the prices the hospitals set before the merger. Find the Bertrand equilibrium prices of the procedures at the two hospitals b) After the merger, find the profit maximizing monopoly prices of the procedure at each hospital. include the effect of each hospital's price on the profit of the other hospital. c) Does the merger result in increased prices?

Reference no: EM13148281

Questions Cloud

Knowledge gained apart from sense experience : Write an argument to persuade others that it is possible to have an idea which did not in some way originate in experience. For example, philosopher, David Hume said that all knowledge originates in sense experience. Immanuel Kant, however believed t..

What is the total savings of scheduling maintenance : If each maintenance check costs $220 and the machine is expected to provide 30,000 hours of service, what is the total savings of scheduling maintenance every 6,000 hours over 3,000 hours?

What is the new volume of gas in liters : A sample containing 2.40 moles neon gas has a volume of 8.00 L. Assume that the pressure and the temperature remain constant.What is the new volume of gas in liters when a leak allows one-half of the neon atoms to escape?

Describe regression relationship-multiple independent : It is the number of independent variables that changes. Describe a regression relationship using multiple independent variables.

Does the merger result in increased prices : find the profit maximizing monopoly prices of the procedure at each hospital. include the effect of each hospital's price on the profit of the other hospital. c) Does the merger result in increased prices?

Process of cost committment during various phases : Using published sources, identify the process of cost committment during various phases of some product's life cycle. Try to find several examples so that you can contrast the rate of cost committment for different products.

Repaying all amounts outstanding : \Natalie is thinking of repaying all amounts outstanding to her grandmother. Recall that Cookie Creations borrowed $2,000 on November 16, 2009, from Natalie's grandmother.

More quickly in solow model but more slowly in romer model : More slowly in the Solow model but more quickly in the Romer model. More quickly in the Solow model but more slowly in the Romer model.

Probability that jim will be accepted by two universities : The acceptance rate for applicants with similar qualifications is 30% for University X and 55% for University Y. What is the probability that Jim will be accepted by at least one of the two universities?

User Account

All Pages