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To review this successful merger, we need to understand how the merger benefited companies while protecting consumers. Disney and Pixar are both dominating ...
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Assume Inverse Demand: P(Q)=150-2Q Cost Curve: C(qi)=10qi (i=1,……,n) In the animation market, we assume that there are only 5 major companies before the merger Thus, n change from 5 to 4 Profit maximization Mr=Mc πi=(150-2Q)qi-10qi Profit maximization π1=[150-2(q1+q2+q3+q4+q5)]q1-10q FOD of Profit=0 ∂π1/∂q1=150-4q1-2(q-i)-10=0 , q-i=q2+q3+q4+q Solve 140-2(q-i)=4q1 and get q1=140/4 - (q-i)/ Symmetric: qi=140/4 - (q-i)/ Since q1=q2=q3=q4=q5 q-i=(n-1)q1 Thus q1=140/4-[(n-1)q1/2] We can get: q =
2 ( 1 + n) When Pixar merged with Disney, n decreases. Thus, q increases, which means that Disney have potential to increase the quantity. On the other hand, if the number of competitors is high (large n), the quantity will decrease, meaning lower market share. Q = 140n 2 ( 1 + n) Since p=150-2Q p =
1 + n
n 1 + n
1 + n
Thus, p increases, which means that Disney have potential to set high price. Since profit πi=(15 0 - 2Q)*qi-10qi π =
2 ( 1 + n)^2 Thus, π increases, which means Disney could earn more profit after the merger.
Barnes, B. (2008, June 1). Disney and Pixar: The Power of the Prenup. Https://www.nytimes.com/2008/06/01/business/media/01pixar.html. Barrabi, T. (2020, June 11). How did Disney buy Pixar? Retrieved July 18, 2020, from https://www.foxbusiness.com/markets/how-did-disney-buy-pixar Chinta, R. (2018, June 13). (PDF) Disney & Pixar - Strategic Merger and Acquisition in Animation, Harvard. Retrieved July 18, 2020, from https://www.researchgate.net/publication/325746827_Disney_Pixar_-_Strategic_Merger_and_Acquisition_in_Animation_Harvar d Fornaciari, J. (n.d.). Disney & Pixar Acquisition: Case Analysis. Retrieved July 18, 2020, from https://www.academia.edu/9364657/Disney_and_Pixar_Acquisition_Case_Analysis Jain, P. (2019, April 08). Disney Pixar Merger: A comprehensive analysis on what this means. Retrieved July 18, 2020, from https://qrius.com/disney-pixar-merger/ La Monica, P. (2006). Disney buys Pixar. Https://money.cnn.com/2006/01/24/news/companies/disney_pixar_deal/. Monica, P. (2006, January 25). Disney buys Pixar. Retrieved July 18, 2020, from https://money.cnn.com/2006/01/24/news/companies/disney_pixar_deal/