The motives for horizontal mergers can be seen in the pic. What does the profit maximization: Market power regard?

Recall: In an oligopoly, success of a firm depends on the choices made by its rivals (Game theory). But interdependence creates uncertainty in planning and there can be more than one Nash equilibrium. This can be solved in two ways: a. Collusion (which can be too difficult or costly and sometimes illegal) b. Merger & acquisition Option b eliminates a close rival, making entry more difficult. Further, firm A might receive larger market share. The merger can also facilitate collusion as coordination becomes easier and reduces number of free riders. Hence, it raises ability to exploit market power.