Final answer:
The merger between T-Mobile and Sprint is an example of a horizontal merger, where two companies within the same industry combine. Such mergers aim to improve market position and efficiency, but can raise concerns about reduced competition. Differentiating from vertical mergers, which involve companies at different production stages, horizontal mergers like the T-Mobile and Sprint union impact the economy and consumer prices.
Step-by-step explanation:
The merger between T-Mobile and Sprint is a type of business consolidation known as a horizontal merger.
This occurs when two companies that operate in the same industry and provide similar products or services combine into one entity. The motive behind such mergers often includes the desire to grow in size, increase market share, improve efficiency, acquire new product lines, remove competition, or to achieve economies of scale.
A vertical merger, on the other hand, involves companies at different stages of production. For example, a manufacturer might merge with a supplier. Vertical mergers aim to streamline production processes and reduce dependency on external parties.
An example of a vertical merger is AT&T's proposed merger with BellSouth in 2006, which was initially blocked by regulation authorities due to concerns of decreased competition in the already small mobile phone service provider market.
Mergers between companies can have significant impacts on the market and consumers. Supporters often argue that such mergers, like the AT&T and BellSouth case, can lead to better services at lower prices due to increased efficiencies and economies of scale.
However, activists and consumer groups frequently express concern that these mergers may lead to reduced competition and potentially higher prices over the long term. Despite such concerns, the government allowed the merger between AT&T and BellSouth to proceed, and the resultant effect on consumers and the market is still a topic of economic analysis.