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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)

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

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References

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Cited by:
  1. Ben Ferrett & Joanna Poyago-Theotoky, 2012. "Horizontal Agreements and R&D Complementarities: Merger versus RJV," Discussion Paper Series 2012_04, Department of Economics, Loughborough University, revised Apr 2012.

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