Beverage Merger Cott Corp markets a portfolio of beverages, bottled waters, beverage, and coffee delivery systems for homes and offices. In November, 2014, it has agreed to merge with DS Services of America, a water and coffee direct-to-consumer services provider. What is the expected effect of this merger on price-cost margins?

These two companies' products are primarily substitutes for each other. A price increase for one company would both affect own profits but also would shift some demand to the other and thereby increase the other's profits. Before the merger, the second effect would not have been captured by the firm raising prices. After the merger, it would. Therefore it is more willing to raise prices.