Chapter 9, Problem 17AA

To determine

To state: The difference between a horizontal merger and a vertical merger.

Answer to Problem 17AA

Horizontal merger is between same business lines whereas vertical merger is amongst different supply chain for a common good.

Explanation of Solution

When the companies that merge exist in the similar line of business, it refers to horizontal merger. A horizontal merger leads to a fall in the competition in the market.

Merger of Dena Bank, Vijaya Bank and several other small banks with Bank of Baroda is an example of horizontal merger.

A vertical merger can be defined as the merger between two or more corporations that though are involved in the same industry but different supply chain functions.

Suppose a car manufacturer merges with the tyre company, that would be an example of the vertical merger.

Economics Concept Introduction

Introduction: Merger refers to the combining of two or more than two organizations formed into one single corporation.