Endogenous mergers and endogenous efficiency gains: The efficiency defence revisited

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

Research output: Contribution to journalArticleResearchpeer-review

24 Citations (Scopus)


We analyse the effects of investment decisions and firms' internal organisation on the efficiency and stability of horizontal mergers. In our framework efficiency gains are endogenous and there might be internal conflict within merged firms. We show that, both with and without conflict, stable mergers often do not generate efficiency gains. In the case of internal conflict, mergers may even lead to efficiency losses. Our welfare results suggest that antitrust authorities may approve welfare-reducing mergers (type II error) and block welfare-enhancing mergers (type I error) if they assume that potential efficiency gains will always be realised. In addition, the paper offers a possible explanation for merger failures. © 2006 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)69-91
JournalInternational Journal of Industrial Organization
Publication statusPublished - 1 Jan 2008


  • Endogenous efficiency gains
  • Endogenous merger formation
  • Internal conflict


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