Final answer:
The bus companies, Greyhound Lines, Inc. and Trailways Transportation System, preferred a broader market definition when considering a merger, which included personal cars, car rentals, trains, and flights. This strategy minimized their perceived market share to avoid being seen as a monopoly in the narrower intercity bus service market, facilitating regulatory approval for the merger.
Step-by-step explanation:
When Greyhound Lines, Inc. and Trailways Transportation System were considering a merger, they faced a strategic decision in defining their market. The choice was between a narrow definition, focused on "the market for intercity bus service," and a broader one that included "the market for intercity transportation," encompassing personal cars, car rentals, passenger trains, and commuter air flights. The bus companies preferred the broader market definition, which dilutes their market share.
The reasoning behind preferring the broader market definition is that it would make the merged entity appear to have a smaller market share in a larger intercity transportation market, rather than a near-monopoly within the narrower intercity bus service market. This broader view includes various forms of transportation, which adds complexity to the competitive landscape and justifies the merger by presenting it as a small player in a significantly larger market. Their strategic preference mitigated antitrust concerns and subsequently allowed the merger to proceed.
Understanding the implications of market definition in business mergers is crucial as it can influence regulatory approval decisions. By arguing for the broader market definition, the companies aimed to ensure their merger was seen in a more favorable light by regulators and the public, highlighting the importance of market scope in business strategies.