Monday, November 3, 2014

Food Distribution Merger

The Wall Street Journal reports that the two largest US food distribution firms (Sysco and US Foods) are merging.  In economics when firms in the same industry merge, we refer to this as a horizontal merger, and there are specific criteria that the US government antitrust authorities look at with horizontal mergers.  The big question to be answered is whether the merger will increase or decrease consumer welfare.  In this case the consumer is a firm such as a restaurant or hotel.  Thus what is the economic impact of the merger on the prices that restaurant's or hotel's have to pay for the food they purchase from this merged firm (or other competitors).

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