Two (2) competing price duopolies have the following demand functions:
x1 = 1 – p1 + 0.7p2 for Firm 1
x2 = 1 – p2 + 0.7p1 for Firm 2
Find the joint surplus if these two (2) firms choose an integrated structure
where both firms cooperate as one organization? Does this organization
maximize total value or total surplus? Fully explain how the choice between
total structural integration and a contract of cooperation between the firms
allowing each firm to retain an independent structure could make a difference
in achieving the goal of total value maximization?