Size of trade cost t
Fig. 1: Foreclosure or import from N
a
No merger case
Foreclosure
a  2c
3
Allow import by 0
0
1
An inverse measure of the degree of product differentiation b
Fig. 2: Foreclosure or import from N
Size of trade cost t
One national merger
with Brand Separation
a
Foreclosure
Output coordination
effect → higher prices
with the same number
of brand lines
ac
2
a  2c
3
Allow import by 0
0
1
An inverse measure of the degree of product differentiation b
Fig. 3: Foreclosure or import from N
Size of trade cost t
One national merger
with Brand Integration
a
Foreclosure
Reduction of brand lines
ac
2
a  2c
3
Allow import by 0
0
1
An inverse measure of the degree of product differentiation b

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