To merge between firms
Most governments regulate mergers between firms. What is the economic rationale behind government regulation? Discuss in detail with a diagram.
- 經濟學人。Lv 51 十年前最愛解答
It is because government believe if there are a too concentrate firm, it will bring ineffiecient (deadweight loss) to the market. (You can think the case in monopoly...)
The ineffiecient include the firm which have domaniate market power (For example a firm with 90% market share), they can set a higher price in order to maximize their profit. (Monopoly)
If there are competition in the market, the competition will bring down the product prices (You can see in 百佳 and wellcome) => War price. The market is more efficient in the case and the societ is well-off in this case.
You can imagine if there are only one supermarket in HK, they will set a higher price than now.
In addition, one famous law in US call anti-trust law. It said that if there are 2 companies in the market, they cannot merge to become a monopoly.
US government want to protect the society by regulate mergers between firms.
Hope can help you~資料來源： ME