The merger of two firms selling close substitutes may lead to higher prices.

Question

Quizplus · Accepted Answer

When two firms selling close substitutes merge, they may have reduced competition in the market, which can lead to an increase in prices. With fewer options available to consumers, the merged firm may be able to charge higher prices without losing too many customers to competitors. This phenomenon is known as a "monopoly effect" and can adversely impact consumers' welfare.

The Merger of Two Firms Selling Close Substitutes May Lead