Week 7 – 11/5 Regulation and the Firm

As we established on Day 1, we are not a pure free market.  The government through regulations plays a role in business life.  Most regulations are intended to protect the consumer.  Rules are in place for the health and safety of consumers, the enforcement of competition, and the provision of public utilities.

Motley Fool Soft Drink Report

Our main focus will be on mergers.  How big is too big?  And why?  That is what we will look at today.  Before one big company can merge with or buy another a review is conducted by the Federal Trade Commission.  Approval of a merger is dependent on the effects on consumers, firms, and society.  We will review the 1986 case of Coca-Cola’s proposed merger with Dr Pepper.  Then the class will review a hypothetical merger in the cereal industry, so read “The Cornflake Cartel” carefully.

To Do:

____  Watch videos

____  Read “The Cornflake Cartel,” sent in email or here: Cornflake cartel.txt

____   Complete Cornflake Cartel Worksheet emailed with article or here: Cornflake Cartel Worksheet

_____ Finalize Minimum Wage Position Paper – due at the start of class 11/5


Why regulate? Jon Stewart “Mr Unclean”

30A: Collusion

30C: Mergers


Coca Cola Merger powerpoint

Natural Monopoly powerpoint


Focus Notes (from videos): printable: Focus Notes Mergers

Collusion is ______________________________________________

It is most likely in which industry?  _______________________

A cartel is ________________________________________________

They generally work by ___________________________________

It is most likely found in which industry? ___________________________

A conglomerate is  between _______________________

Vertical Merger is between  ____________________________________________

Generally good or bad for the consumer?  ____________________

Horizontal Merger is between ___________________________________________

Generally good or bad for the consumer?  _____________________

How is the Herfindahl-Hirschmann (HH) Index used?  __________________

How is the HH calculated? ________________________

Calculate the HH for the soda industry using the numbers above  __________________

How would you characterize this industry? Highly Competitive to Highly Concentrated_______________________


6 thoughts on “Week 7 – 11/5 Regulation and the Firm”

  1. Probably end up around 1000ish. Could be a great, thorough paper at 800 or 1200. Most important is to check your work against the rubric.


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