Reply To: Austrian Economics and Mergers


The general point to keep in mind is that mergers, like all production decisions in the market, can be judged according to their effect on net income and net worth. If a merger lowers the value of the combined assets in serving consumers, then investors have incentive to break up the assets into components and thereby, increase their capital value. Entrepreneurs are continuously trying different combinations of assets by merging and breaking up.

So a merger is only viable in the market if it increases the value of assets. But if it increases the value of assets, this demonstrates that it better serves consumers than other ways to organize the assets.

In your situation, if a company owned all sources of supply of a resource, then whether or not it was a wise business decision to keep control of them and produce all the product in one enterprise or sell the sources of supply one-by-one to different groups of investors can be determined by which alternative renders the highest prices for the sources of supply.