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IMG_0003_NEW_0014 - in a Application Merger Provisions of...

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The Canadian CompetitionAct (1986) provides the govemment with the power to disallow mergers ifthey result in a significant lessening of competition (SLC). HoweveE a merger that substantially lessens cof,rpetitionmay be dllowed ifthe merger will bring about efiicienly gains that are greater than and will ofset the SLC. Application: Merger Prouisions of Canada's C omPetiti an Act Assumes that MC decrease with merger (due to economies of scale or scope). Cartels market. ' oOutput iii'strictly limited to iecure monopoly Profits for its members' oEach member is g:iven a gtrota. oEx:OPEC Ttrere may be cost-based nafiralmonotr1oly There may be pedect competition for monopolypawer that benefits the consumer and reduces monopoly Profits . Patent races . Network effects C rh:;i;AnythW cooa enaii-'i MonoPolY Powefi i Monopolists may have greater i ahilitt/ineenfives to innovate i oA cartel is a group of producers that enter into a collusive agreement aimed at controlling
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Unformatted text preview: in a Application: Merger Provisions of Canada's Conpetition Act C = [email protected]; M : Monopoly Cartel $ / unit PM Market Shucture and the Incentive to Innovate o Prcm a static perspective, monopoly is socially undesirable because oulput is restricted. o Hcruvener, it is sometimes argrred that monopolists are also more irnrentive and irurovative, so that from a dynamic perspectire the negative effects oi monopoly are reduced or renersed, o fire JcJrnrnpebrtan Eypothesi,ssuggests that fims with market po$rer are more likely to engage in irurorative activity or to irwest in R&D. j J , .7 This example depicts equal quotas for 4 members. Cartels arc inherentlyunstable. It is very temptingto overproduce and take advantage ofhigh price. Ifthe cartel's production is not alarge enough proportion ofworld productiorl then non-members can also take advantage ofthe high price....
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