effects on merging companies on prices and production, in terms of short run and long run?

Question

what do you think the impact will be on the prices, total production of a company if they merge in an competitive market? in the short run and the long run? is it profitable?

Answer 1

Nobody can give you an answer for what you're asking, since every situation is different... but... here's some factors that influence what you're asking..

1) for the merger, is there many suppliers in the marketplace, or is an oligopy, approaching a monopoly?

2) is there alot of mgmt / overhead? Economies of scale to be reached for R & D.??

3) high innovation in the marketplace? static or decreasing industry sales?

Of course the 'best' solution for the customer is cheaper price, faster response, better and diverse products, high innovation.

Answer 2

I can give you a couple examples.
For many years, previous to the late '90s, at any given time there were about 500 carpet manufacturers in the US. Today there are 3-4.
There was a time when I could sell an excellent quality carpet under $20.00 per square yard. This is $2.22 per square foot. A whole other subject, but one comment. A room 10' X 10' = 100 sq,feet. Standard carpet is 12' width.
One must buy 12' X 10'=120 sq. feet. DUHHHHHHHHH!

Another example, in automobile manufacturing. At one time they had to purchase glass from an independent glass manufacturer, upholstery from another, etc. When this was permitted by our government following WWII up to the present time, "small" manufacturers disappeared. This occurred in floor covering also.

Profitable? You bet. However, the global economy has interrupted this. Bear in mind that our private industry is competing with foreign industry that is government owned in many countries. Think oil, Middle East, Venezuela, Mexico, etc.