A vertical merger will seldom reduce competition if
A)there is exclusive dealing in the market.
B)the merger occurs at the raw materials stage of production.
C)there are other firms competing at each level of production.
D)there is resale price maintenance in the market.
E)the merged firm competes only in prices.

Question

Quizplus · Accepted Answer

A vertical merger refers to the combination of firms at different stages of production. If there are other firms competing at each level of production, then the merged firm will still face competition and is less likely to reduce competition in the market. Exclusive dealing and resale price maintenance can limit competition, but these factors are not related to whether a vertical merger will reduce competition. If the merger occurs at the raw materials stage of production, it may give the merged firm too much market power and reduce competition downstream, but this is not always the case. If the merged firm competes only in prices, it may still face competition from other firms offering similar pricing strategies.

A Vertical Merger Will Seldom Reduce Competition If