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Mergers, Investment Decisions and Internal Organisation

  • Albert Banal-Estañol
  • Inés Macho-Stadler
  • Jo Seldeslachts

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 efficiency 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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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 111.

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Date of creation: Feb 2004
Date of revision:
Handle: RePEc:bge:wpaper:111
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  20. Banal-Estanol, Albert, 2007. "Information-sharing implications of horizontal mergers," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 31-49, February.
  21. Holmstrom, Bengt, 1999. "The Firm as a Subeconomy," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 74-102, April.
  22. 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.
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  26. repec:oup:qjecon:v:98:y:1983:i:2:p:185-99 is not listed on IDEAS
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