Suppose the European Union (EU) is investigating a proposed merger between two of the largest distillers of premium Scotch liquor. Based on some economists’ definition of the relevant market, the two firms proposing to merge enjoyed a combined market share of about two-thirds, while another firm essentially controlled the remaining share of the market. Additionally, suppose that the (wholesale) market elasticity of demand for Scotch liquor is -1.7 and that it costs $15.10 to produce and distribute each liter of Scotch.
Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium Scotch liquor.
This is a Cournot oligopoly.
Instruction: Do not round intermediate calculations. Round your final answers to the nearest penny (two decimal places).
Pre-merger price: $_____
Post-merger price: $_____