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The CEO of Staples claims that prices will be lower if the FTC approves the merger...

The CEO of Staples claims that prices will be lower if the FTC approves the merger of his company with Office Depot. Let the inverse demand function be given by P(Q) = 6 – 4Q. The pre-merger cost function is given by C(Q) = 4Q and the post-merger cost function is given by C(Q) = 4θQ, where θ ≤ 1. Assume that the competitive outcome prevails pre-merger and the monopoly outcome prevails post-merger. Determine the value(s) of θ that must prevail post-merger in order for the CEO’s statement to be credible.

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