Question

Write short notes on mergers.

Answer 1

Mergers involve the consolidation of two or more independent firms into a single firm. In an oligopoly, firms may merge when they cannot form cartels or accept a dominant price leader, helping to reduce rivalry and uncertainty. Mergers are encouraged by factors such as technological changes, international competition, deregulation, and cost-cutting pressures.

• Horizontal mergers occur when firms producing the same product in the same market combine, reducing the number of competitors.
• Vertical mergers involve firms at different stages of production. If a firm merges with its input supplier, it is called upstream integration; if with its distributor, it is downstream integration.
• Conglomerate mergers happen between unrelated businesses to expand the market, product line, or investment opportunities.