It Is Generally Accepted That Horizontal Mergers (Between Competitors) Decrease $\begin{array}{ll}\text { A } & 26 \% \\\text { B } & 20 \\\text { C } & 54 \%\end{array}$

question 18

Essay

It is generally accepted that horizontal mergers (between competitors) decrease competition. Imagine a three firm industry in which the competitors' market shares are as follows:
$\begin{array}{ll}\text { A } & 26 \% \\\text { B } & 20 \\\text { C } & 54 \%\end{array}$ Is it possible that a merger between A and B would increase competition in the industry to the benefit of customers?

---

Definitions:

Contribution Margin

The difference between a company's sales revenue and its variable costs, serving as a measure of the profitability of individual products.

Monthly Unit Sales

The total number of units of a product sold by a company in a given month, often used to track sales trends and forecast demand.

Variable Costs

Costs that vary directly with the level of production or output, such as raw materials and direct labor expenses.

Fixed Costs

Costs that remain constant regardless of the amount of production or sales, including rent, salaries, and insurance fees.