Horizontal Mergers and Acquisitions with Endogenous Efficiency Gains

Christos Cabolis (), Constantine Manasakis () and Emmanuel Petrakis ()

No 817, Working Papers from University of Crete, Department of Economics

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.

Keywords: Horizontal mergers and acquisitions; Processes Innovations; Endogenous efficiency gains. (search for similar items in EconPapers)
JEL-codes: C72 G34 O31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-ino and nep-mic
Date: 2008-06-18
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Persistent link: http://EconPapers.repec.org/RePEc:crt:wpaper:0817

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