Answer to Question #123047 in Economics for Kelvin

Question

Vertical mergers have the potential of substantially reducing competition in a market, and force other firms in the market to also merge. Why does this occur in an industry? What happens to firms who fail to merge vertically ?

Answer 1

Vertical merge gives possibility to decrease production costs and make production more efficient, as the company doesn't have to buy resources and intermediate goods for production.

So, the firms who fail to merge will face losses and shut down.