Discuss the issue of horizontal mergers as a separate theory of market structure. Comment on the similarities and differences between this approach and the antitrust market definition approach pursued in practice within a merger investigation.
First set up a brief discussion of the two theoretical models (Cournot and Bertrand) and the conclusions drawn from each. Shortcomings in the analysis of the Cournot model (lack of coordinated effects, explain how these can be added in by altering the diagram, lack of consideration of expansion costs - explain how these can be added in by altering your diagrammatical analysis of the model, and any other shortcomings you can think of – these are numerous, make sure you justify those you do include).
How does this connect to what we have learned on how to make decisions based on the market definition test, which will determine the number and hence the type of competition conducted (in this case within the context of a merger inquiry) in practice? Is this approach more complete in terms of the determinants of the degree of competition included (supply and demand substitution considerations, extent of capacity constraints and/or barriers to entry, etc.) or less? To answer think of which considerations are already included in the theoretical method, which ones were not and you had to add in, and finally which ones (if any) were not and could not possibly be added in.
Note: there is no pro-forma answer and while many points are expected to be highlighted by the majority of essays on this topic, the whole point is that there is a variety of ideas (many of which I may not have thought of!) which are perfectly acceptable as long as they are justified.