Economic Theory of Mergers

The economic theory of mergers examines why companies combine and how these mergers impact market competition and efficiency. Mergers can create benefits like cost savings, increased market power, or more innovative products. However, they can also reduce competition, potentially leading to higher prices for consumers. Economists analyze whether a merger will enhance a company's efficiency or unfairly limit choices, using factors like market share and industry dynamics. The goal is to balance potential efficiencies against possible negative effects on consumers and fair competition.