It is important to note that upon merging dragons, the Dragon Power worth of the ones you merge is lost.
Let's take the example of 5 level 1 Crimson Dragons that you would merge to get two level 2 ones. By doing this, you will lose 5 Dragon Power (which is the total value of the level 1 dragons merged) but you will earn 8 Dragon Power (which is the total value of the level 2 dragons you will obtain). In this case, you will notice a total increase of 3 Dragon Power.
Let's take the example of 5 level 1 Crimson Dragons that you would merge to get two level 2 ones. By doing this, you will lose 5 Dragon Power (which is the total value of the level 1 dragons merged) but you will earn 8 Dragon Power (which is the total value of the level 2 dragons you will obtain). In this case, you will notice a total increase of 3 Dragon Power.