Google and Yahoo are two major firms in the internet search engine industry. They receive high viewer-ship everyday.

We have just learnt about cost theory, size of firms, monopoly which are economically relevant to the google and yahoo proposed merger.

The size of these two firms are considered large as they have large amount of equity, capital assets, number of employees, sales revenue and market share.

As these two firms are already large, the proposed merger of them brought about much controversy. A coalition made up of 16 civil rights and rural advocacy groups have voiced their distrust of the possible merger. Some felt that a mega merger(involving two large firms) will bring about disadvantages that outweighed advantages to consumers.

The proposed merger is considered a horizontal integration as Yahoo and Google are two firms producing similar services and are at the same stage of production. This proposed merger may reap more economies of scale, thus enabling them to lower their cost per unit of output when they expand their scale of production after merger.

An umbrella group of 36 civil rights organizations including the NAACP and the National Urban League sent a letter to Thomas Barnett, Assistant Attorney General of the Antitrust Division, United States Department of Justice, claiming that a deal between the two companies would give Google almost 90% of the search advertising market and strengthen its influence over internet users' access to information.

This will create a near monopoly as Google will have a very large market share. This led to consumers being worried that
-most of the content put on the internet requires Google’s permission before they can be put up.
-increased competition
-higher usage pricing
-limit business opportunity to new firms

QUOTE from Niel Ritchie, executive director of the League of Rural Voters
"We believe the government should give this agreement very careful scrutiny"

This is also what we have learnt in school, that government intervention and regulation may be brought in when a monopoly exist in a particular industry.

:Dafter studying economics, I am able to understand such articles and issues better

kelly :) yay!

Output time: 8:24 PM