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Horizontal Mergers and Acquisitions with Endogenous Efficiency Gains

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Author Info
Christos Cabolis () (ALBA Graduate Business School)
Constantine Manasakis () (Department of Economics, University of Crete, Greece)
Emmanuel Petrakis () (Department of Economics, University of Crete, Greece)

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Abstract

We examine how the strategic long-run decisions, such as cost-reducing R&D investments, prior to the decision for integration; create endogenous efficiency gains that make a horizontal integration profitable. The "merger" and the "acquisition" are distinguished as different modes of horizontal integration, with respect to both incentives and equilibrium outcomes. We show that firms' incentives for integration depend on the magnitude of the cost efficiencies that R&D investments give rise to and the rule of sharing of the integrated entity's profits across participants. The welfare effects of horizontal integrations are also discussed.

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Publisher Info
Paper provided by University of Crete, Department of Economics in its series Working Papers with number 0817.

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Date of creation: 18 Jun 2008
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Handle: RePEc:crt:wpaper:0817

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Related research
Keywords: Horizontal mergers and acquisitions; Processes Innovations; Endogenous efficiency gains.;

Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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    Other versions:
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