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Economics notes


Mergers are transactions in which two or more firms combine their operations and assets to form a single entity. Mergers are often driven by strategic considerations, such as gaining market share, diversifying product offerings, achieving economies of scale, or accessing new geographic markets. Mergers can take different forms, including horizontal mergers, vertical mergers, and conglomerate mergers. 1. Horizontal mergers: Horizontal mergers involve the combination of two or more firms operating in the same industry or market. These mergers aim to consolidate market power, increase efficiency, and achieve cost savings through economies of scale. Horizontal mergers can lead to a more concentrated industry landscape and potentially raise concerns about reduced competition.

What is a merger and why do firms engage in mergers?

A merger is a corporate action in which two or more companies combine to form a single entity. Firms engage in mergers for various reasons, including achieving economies of scale, expanding market share, entering new markets, diversifying product offerings, acquiring strategic assets or capabilities, gaining competitive advantages, and improving profitability and efficiency.

What are the potential benefits of mergers?

Mergers can lead to increased efficiency, economies of scale, expanded market reach, synergies, improved competitiveness, innovation, and enhanced shareholder value if successfully executed and managed.

How do mergers impact market concentration?

Mergers can increase market concentration and reduce competition.

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