Question

In January 2007, XM enjoyed about 58 percent of satellite radio subscribers, and Sirius had the remaining 42 percent. Both firms were suffering losses, despite their dominance in the satellite radio market. In 2008, the DOJ decided not to challenge a merger, and these two firms united to become Sirius XM. If you were an economic consultant for Sirius, what economic arguments would you have presented to the DOJ to persuade it not to challenge the merger? Explain.

Answer 1

The market for satellite radio services, as stated from the instance, is a loss-making duopoly. The duopolists cannot control a higher price stressing it won't be matched and the rival will get a 100 percent market share. Thus there's absolutely no manner in which they may make a profit or at least reduce their losses (dismissing the potential for collusion).
The merger appears to be an apposite policy because it will change the market for satellite radio services from a duopoly to a monopoly. The merger will make a company on the market. Being a monopoly, it can reduce the price of manufacturing and provide at a price higher than the one they'd put operating.
This can definitely bring monopoly profits and the business will soon begin recuperating. The merger could be permitted if there aren't any obstacles to entry, in the event the merger is secure and when there are sufficient practices. These arguments are enough to convince the Justice Department to not challenge the merger allow it to occur.