firms to raise prices or to reduce the quantity produced

tying sales a situation where a customer is allowed to buy one product only if the customer also buys another

product

Key Concepts and Summary

11.1 Corporate Mergers

A corporate merger involves two private firms joining together. An acquisition refers to one firm buying

another firm. In either case, two formerly independent firms become one firm. Antitrust laws seek to ensure

active competition in markets, sometimes by preventing large firms from forming through mergers and

acquisitions, sometimes by regulating business practices that might restrict competition, and sometimes by

breaking up large firms into smaller competitors.

A four-firm concentration ratio is one way of measuring the extent of competition in a market. We calculate it

by adding the market shares—that is, the percentage of total sales—of the four largest firms in the market. A
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