4 Comment on the PfizerAllergan merger from the standpoint o

4. Comment on the Pfizer-Allergan merger from the standpoint of oligopoly theory

Solution

Pfizer and Allergan are Pharmaceutical giants. They merged together to form biggest drug company. Oligopoly is a market where there are a few sellers of the commodity and each sells substantial portion of the output of the industry. Each firm is aware that it possesses a large degree of monopoly power. Oligopoly is basically \"Competition among the few sellers\".

There would be interdependence of decision between Pfizer and Allergan. They have to take into consideration the possible reaction of rivals, when making any business decision. This is one of the important feature of oligopoly. Group behaviour will be observed in the form of collective decisions and the mutual cooperation amongst them as occur normally in the case of oligopoly firms. There will be causing substantial barriers to the entry of new firms in the industry as a result of this merger. Price fixation of the commodity will not be uniform as prevalent in the cases of perfect competition.