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Mergers, Investment Decisions and Internal Organisation

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Author Info
Albert Banal-Estanol ()
Ines Macho-Stadler ()
Jo Seldeslachts ()

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Abstract

We analyse the effects of investment decisions and firms' internal organisation on the efficiency and stability of horizontal mergers. In our framework economies of scale are endogenous and there might be internal conflict within merged firms. We show that often stable mergers do not lead to more e.ciency and may even lead to efficiency losses. These mergers lead to lower total welfare, suggesting that a regulator should be careful in assuming that possible efficiency gains of a merger will be effectively realised. Moreover, the paper offers a possible explanation for merger failures.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 944.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_944

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Related research
Keywords: horizontal mergers investment efficiency gains internal conflict

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lars-Hendrik Röller & Johan Stennek & Frank Verboven, 2000. "Efficiency Gains from Mergers," CIG Working Papers FS IV 00-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
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  2. Barros, Pedro Pita, 1998. "Endogenous mergers and size asymmetry of merger participants," Economics Letters, Elsevier, vol. 60(1), pages 113-119, July. [Downloadable!] (restricted)
  3. Raghuram G. Rajan & Luigi Zingales, 1998. "Power In A Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 387-432, May. [Downloadable!] (restricted)
    Other versions:
  4. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May. [Downloadable!] (restricted)
  5. Ray, Debraj & Vohra, Rajiv, 1999. "A Theory of Endogenous Coalition Structures," Games and Economic Behavior, Elsevier, vol. 26(2), pages 286-336, January. [Downloadable!] (restricted)
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  6. Belleflamme, Paul, 2000. "Stable Coalition Structures with Open Membership and Asymmetric Firms," Games and Economic Behavior, Elsevier, vol. 30(1), pages 1-21, January. [Downloadable!] (restricted)
  7. Fridolfsson S.O. & Stennek J., 1999. "Why mergers reduce profits, and raise share prices: A theory of preemptive mergers," Working Papers 1999018, University of Antwerp, Faculty of Applied Economics. [Downloadable!]
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  8. Stennek, J. & Verboven, F., 2001. "Merger Control and Enterprise Competitiveness - Empirical Analysis and Policy Recommendations," Research Institute of Industrial Economics Working Papers 556, Research Institute of Industrial Economics.
    Other versions:
  9. Holmstrom, Bengt, 1999. "The Firm as a Subeconomy," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 74-102, April.
  10. Sanjeev Goyal & José Luis Moraga, 2000. "R&D Networks," Tinbergen Institute Discussion Papers 00-075/1, Tinbergen Institute. [Downloadable!]
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  11. Albert Banal-Esta?l, 2002. "Information-Sharing Implications of Horizontal Mergers," UFAE and IAE Working Papers 544.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
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  12. Horn, Henrik & Persson, Lars, 2001. "Endogenous mergers in concentrated markets," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1213-1244, September. [Downloadable!] (restricted)
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  13. Motta, Massimo & Vasconcelos, Helder, 2004. "Efficiency Gains and Myopic Antitrust Authority in a Dynamic Merger Game," CEPR Discussion Papers 4175, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  14. Mar? Paz Espinosa & Inés Macho-Stadler, . "Endogenous Formation Of Partnerships With Moral Hazard," UFAE and IAE Working Papers 448.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
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  15. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March. [Downloadable!] (restricted)
  16. Morton I. Kamien & Israel Zang, 1988. "The Limits of Monopolization Through Acquisition," Discussion Papers 802, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  17. Joseph Farrell & Carl Shapiro, 2001. "Scale Economies and Synergies in Horizontal Merger Analysis," Industrial Organization 0012002, EconWPA, revised 05 Jan 2001. [Downloadable!]
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  18. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-17, August. [Downloadable!] (restricted)
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  19. George J. Mailath & Volker Nocke & Andrew Postlewaite, 2002. "Business Strategy, Human Capital, and Managerial Incentives," PIER Working Paper Archive 03-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 23 Jun 2003. [Downloadable!]
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  20. Licun Xue & Rabah Amir & Effrosyni Diamantoudi, 2004. "Merger Performance under Uncertain Efficiency Gains," Working Papers 2004.79, Fondazione Eni Enrico Mattei. [Downloadable!]
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  21. Effrosyni Diamantoudi, 2003. "Equilibrium binding agreements under diverse behavioral assumptions," Economic Theory, Springer, vol. 22(2), pages 431-446, 09. [Downloadable!] (restricted)
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  22. Paolo Fulghieri & Laurie Simon Hodrick, 2006. "Synergies and Internal Agency Conflicts: The Double-Edged Sword of Mergers," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 15(3), pages 549-576, 09. [Downloadable!] (restricted)
  23. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn. [Downloadable!] (restricted)
  24. Yi, Sang-Seung, 1997. "Stable Coalition Structures with Externalities," Games and Economic Behavior, Elsevier, vol. 20(2), pages 201-237, August. [Downloadable!] (restricted)
  25. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Miguel González-Maestre & Diego Peñarrubia, 2005. "Innovation, merger policy and technology transfer," Investigaciones Economicas, Fundación SEPI, vol. 29(1), pages 181-201, January. [Downloadable!]
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