Monopolistic competition, also called competitive market, where there is a large number of firms, each having a small proportion of the market share and slightly differentiated products. Oligopoly, in which a market is by a small number of firms that together control the majority of the market share.

In an oligopoly, a few sellers supply a sizable portion of products in the market. They exert some control over price, but because their products are similar, when one company lowers prices, the others follow. In a monopoly, there is only one seller in the market.

An oligopoly is a market structure in which a few firms dominate. When a market is shared between a few firms, it is said to be highly concentrated. Although only a few firms dominate, it is possible that many small firms may also operate in the market.

Oligopoly describes a market dominated by a few large, profitable firms through collusion or cartel. It is further away from perfect competition than monopolistic competition is. Final prices are higher for consumers.

Economics Chapter 7 Terms

A	B
commodity	a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk
barrier to entry	any factor that makes it difficult for a new firm to enter a market
imperfect competition	a market structure that does not meet the conditions of perfect competition

E 4– Demand: Vocabulary Practice

A	B
two goods that are bought and used together	complements
“all other things held constant”	ceteris paribus
when consumers react to a price rise of one good by consuming less of that good and more of another good in its place	substitution effect

While a perfectly competitive market has many buyers and sellers, monopoly markets have only one seller, but any number of buyers. In fact, barriers to entry are the principal condition that allows monopolies to exist.

A merger is when two or more businesses join together to form a single company. A merger is typically a voluntary action on the part of all companies involved and may involve stock swaps or cash payments.

A merger is the voluntary fusion of two companies on broadly equal terms into one new legal entity. The five major types of mergers are conglomerate, congeneric, market extension, horizontal, and vertical.

Co-branding (also called brand partnership) as described in Co-Branding: The Science of Alliance, is when two companies form an alliance to work together thus creating marketing synergy. …

Consolidation: [7] A consolidation is a combination of two or more companies into a new company. In this form of merge, all the existing companies, which combine, go into a new company. In this form of merger, all the existing companies, which combine, go into liquidation and form a new company with a different entity.

Amalgamation is the consolidation or combination of two or more companies known as the amalgamating companies usually the companies that operate in the same or similar line of business to form a completely new company whereas merger refers to the consolidation of two or more business entity to form one single joint …

Amalgamation is the legal process, in which two or more companies combine themselves to form a new company. On the other hand, absorption is when two or more companies are combined into an existing company.

Steps to Merging a Business

1. Step 1: Assess the Health of the Companies Involved in the Merger.
2. Step 2: Set Goals for Your Merger.
3. Step 3: Assemble a Team to Help You Through the Merger.
4. Step 4: Determine the Terms of the Merger.
5. Step 5: Create a Purchase and Sale Agreement.

• The top M&A deals of 2020.
• L Brands (ticker: LB) and Sycamore Partners.
• T-Mobile (TMUS) and Sprint.
• E-Trade (ETFC) and Morgan Stanley (MS)
• SoftBank and WeWork.
• Amazon.com (AMZN) and AMC Entertainment (AMC)
• Uber Technologies (UBER) and Grubhub (GRUB)
• AstraZeneca (AZN) and Gilead Sciences (GILD)

Buying stocks ahead of a merger is risky business. So-called merger arbitrage has been likened to “picking up pennies in front of a steamroller,” which should say something about trying to make money on the difference between the current market price and the takeout price.

Small Business Merger Guidelines

1. Compare and analyze the corporate structures.
2. Determine the leadership of the new company.
3. Compare the company cultures.
4. Determine the branding of the new company.
5. Analyze all financial positions.
6. Determine operating costs.
7. Do your due diligence.
8. Conduct a valuation of all companies.

Types of Mergers. The three main types of mergers are horizontal, vertical, and conglomerate. In a horizontal merger, companies at the same stage in the same industry merge to reduce costs, expand product offerings, or reduce competition.

In theory, a merger of equals is where two companies convert their respective stocks to those of the new, combined company. However, in practice, two companies will generally make an agreement for one company to buy the other company’s common stock from the shareholders in exchange for its own common stock.

A business merger may give the acquiring company a chance to grow its market share. Mergers and acquisitions are also cost-effective. They can reduce the costs of developing business activities that will complement a company’s strengths. The acquisition can also increase the supply-chain pricing power.

Disadvantages of a Merger

• Raises prices of products or services. A merger results in reduced competition and a larger market share.
• Creates gaps in communication. The companies that have agreed to merge may have different cultures.
• Creates unemployment.
• Prevents economies of scale.

Mergers are considered to be a more friendly corporate restructuring strategy. This is because they are voluntary and mutually beneficial for both companies involved. In contrast, acquisitions generally carry a more negative connotation because the term entails that one company completely consumes another.

Horizontal merger: Combination of at least two firms doing similar businesses at the same market level.

Types of Mergers

• Horizontal – a merger between companies with similiar products.
• Vertical – a merger that consolidates the supply line of a product.
• Concentric – a merger between companies who have similar audiences with different products.
• Conglomerate – a merger between companies who offer diverse products/services.

Mergers combine two companies into one surviving company. Consolidations combine several companies into a new, larger organization. For instance, if Company ABC and Company XYC were to consolidate, they might create Company MNO.

The following are among the biggest mergers of all time.

• Vodafone and Mannesmann. This merger, which took place in 2000, was worth over $180 billion and is the largest merger and acquisition deal in history.
• America Online and Time Warner.
• Pfizer and Warner-Lambert.
• AT and BellSouth.
• Exxon and Mobil.

The combination or fusion of one thing or right into another thing or right of greater or larger importance so that the lesser thing or right loses its individuality and becomes identified with the greater whole. In contract law, agreements are merged when one contract is absorbed into another.

Exchanging Stocks This is the most common way to finance a merger or acquisition. If a company wishes to acquire or merge with another, it is to be assumed the company has plentiful stock and a solid balance sheet. In the average exchange, the buying company exchanges its stock for shares of the seller’s company.