Mergers are of two types. A horizontal merger entails firms yielding or selling a similar product. A vertical merger takes place when one firm merges with another on which it is dependent for its purchases of inputs or to whom it sells a finished product. Every oligopolist possesses a responding function which is the process wherein one oligopolist responds to an alteration in price or output or quality of another oligopolist. (Chapter 26: Oligopoly and Strategic Behavior).

             Economists use game theory models to explain the manner in which the firms communicate in a rational manner. Game theory is the systematic structure wherein two or multiple persons, businesses, or countries compete for some payoffs which depend on the strategy which others use. The plans chalked out by these persons are called as game strategies. If economies of scale are great, compared to market volume, an oligopoly scenario will come about. It seems that throughout the globe, manufacturing industries like auto, steel, televisions, cigarettes and many other articles are produced by a limited number of firms. On the contrary, in case of agricultural products, textiles there are several companies manufacturing them. On paper, since, the benefit of economies of scale do not persist forever, there is a chance, if the market demand for automobiles were substantially adequate, in that case the automobile industry may move toward the monopolistic competition market structure. Concentration ratios are largely considered to gauge the extent of monopoly or oligopoly market strength in an industry. .

             As concentration ratios point out a high concentration a several U.S. industries, the decision frequently is that U.S. industry is not very competitive. A national concentration ratio may be comparatively low, but regional or local concentration ratios may be very high. On equilibrium, concentration ratios might belittle the extent of concentration that is present, particularly while one takes into account competition from overseas imports.