econ 116

There have been several mergers of large firms within oligopolies. In this assignment, you are to assess the impact of those mergers, on industry, on consumers and on society as a whole. There are 3 parts to the assignment.

• First, you are to go to the Federal Trade Commission’s Web site and select 1 proposed merger for your paper. Then, in a group Discussion Board, present a complete description of the industry.
• Second, in another group Discussion Board, present 2 arguments: One in support of the merger and the other opposing the merger.
• Finally, write a paper of 5–8 pages that contains the industry description, and the two arguments.
• Set-up a group Discussion Board, and post the following information.

Part 1: Industry Description

1. Describe the firms in the proposed merger. List their annual sales, and extent of their operations.
2. From the firms’ point of view, what are some of the incentives to consolidate?
3. List and describe the firms in the industry.
4. Describe the product, production methods, scale of production, and sources for raw materials. What technologies are used?
5. Describe the competitive environment within the industry. Is there a dominant firm? Do the other firms follow the dominant firm’s lead or actively compete? How do they compete (e.g., by using price, advertising, quality, or some other variable)?
6. Report and interpret the 4-firm concentration ratio, the 8-firm concentration ratio, and the Herfindahl Hirschman Index for the industry, if they can be found.

Part 2: Two Arguments

In a separate group Discussion Board, present 2 arguments. The first should argue in favor of the proposed merger, from the perspective of the firms. The second argues against the proposed merger from the perspective of the broader public interest. In those arguments, answer the following questions.

1. Explain the importance of competition among firms.
2. Explain whether the competitive environment in this industry benefits society or not.
3. Is a high degree of market concentration a boon or threat to consumers? Explain. Use either the allocative efficiency or dynamic efficiency arguments.

Part 3: Written Report

Write a paper of 5–8 pages that contains the information presented in your group discussion boards. Concentration ratios and descriptive statistics for various industries are available at the Census Bureau’s economic census Web site.

This assignment will also be assessed using additional criteria provided here.

References