Price Theory Industry Analysis

Two producers of pre-mixed concrete, Big Industries and ConCorp, have applied to the
Minister for Finance for Merger Authorisation. The two companies are proposing to combine into a single corporate entity to be known as BigCon. The two companies claim that
the merger should be authorised as,
• the merged firm will be able to achieve substantial efficiency gains as a result of
combining production and
• a third firm, Aggregate Inc., will remain as a competitor to the merged firm in the
pre-mixed concrete market, ensuring that consumers are not adversely affected.

The Minister for Finance has instructed you to determine the likely impact of the proposed
merger on the market, and to recommend whether or not authorisation for the merger
should be granted. Under the relevant legislation, authorisation for a merger can be granted
• the proposed acquisition would not be likely to substantially lessen competition OR
• the likely public benefit from the proposed acquisition outweighs the likely public

Sample Solution