If a company improves its competitive position by means of a merger or acquisition, it may be possible to derive potential market power from the deal.

Question

Quizplus · Accepted Answer

When a company merges with or acquires another company, it may gain a stronger competitive position and therefore the potential to exercise market power. This can be achieved by reducing competition in the market, increasing barriers to entry, and gaining the ability to raise prices without losing customers. However, the extent of the market power derived from a merger or acquisition depends on various factors like the size of the companies involved, the market structure, and regulatory constraints.

If a Company Improves Its Competitive Position by Means of a Merger