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Horizontal Mergers and Firm Advantages

Question

Explain the advantages to a firm of a horizontal merger.

Category:

Firm Behavior and Strategies

Frequently asked question

Preview Answer

I. 🍃Introduction
- Explanation of the importance of understanding the reasons behind a company's actions

II. Reasons for gaining market power
- Eliminating a competitor
- Controlling more of the market
- Increasing prices as fewer competitors
- Examples of companies that have gained market power

III. Reasons for reducing average costs of production
- Taking greater advantage of economies of scale
- Example of economy of scale
- Decreasing prices/profits to remain competitive internationally

IV. Reasons for keeping up with competitors
- Avoiding being driven out of the market
- Examples of companies that have failed to keep up with competitors

V. 👉Conclusion
- Recap of the importance of understanding a company's motivations
- Implications for consumers and the market as a whole

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