Abstract
We introduce simple production economic models to estimate the potential gains from mergers. We decompose the gains into technical efficiency, size (scale) and harmony (mix) gains, and we discuss alternative ways to capture these gains. We propose to approximate the production processes using the non-parametric Data Envelopment Analysis (DEA) approach, and we use the resulting operational approach to estimate the potential gains from merging agricultural extension offices in Denmark.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References
J.D. Akhaven A.N. Berger D.B. Humphrey (1997) ArticleTitle“The Effects of Megamergers on Efficiency and Prices: Evidence from a Bank Profit Function” Review of Industrial Organization 12 95–139
R.D. Banker A. Charnes W.W. Cooper (1984) ArticleTitle“Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis” Management Science 30 1078–1092
R.D. Banker (1984) ArticleTitle“Estimating Most Productive Scale Size Using Data Envelopment Analysis” European Journal of Operational Research 17 35–44
P. Bogetoft (1994) ArticleTitle“Incentive Efficient Production Frontiers: An Agency Perspective on DEA” Management Science 40 959–968
P. Bogetoft (1995) ArticleTitle“Incentives and Productivity Measurements” International Journal of Production Economics 39 67–81
P. Bogetoft (1996) ArticleTitle“DEA on Relaxed Convexity Assumptions” Management Science 42 457–465
P. Bogetoft (1997) ArticleTitle“DEA-Based Yardstick Competition: The Optimality of Best Practice Regulation” Annals of Operations Research 73 277–298
Bogetoft, P. (1998). Production Recognition, Sub-Process Aggregation and Efficiency. Working Paper, Department of Economics, Royal Agricultural University Copenhagen.
P. Bogetoft (2000) ArticleTitle“DEA and Activity Planning under Asymmetric Information” Journal of Productivity Analysis 13 7–48
Bogetoft, P., R. Färe and B. Obel. (2004). Allocative Efficiency of Technically Inefficient Units. European Journal of Operational Research, to appear, Available online August 2004.
R. Brännlund Y. Chung R. Färe S. Grosskopf (1998) ArticleTitle“Emissions Trading and Profitability: The Swedish Pulp and Paper Industry” Environmental and Resource Economics 12 345–356
A.S. Chapin S.J. Schmidt (1999) ArticleTitle“Do Mergers Improve Efficiency? Evidence from Deregulated Rail Freight” Journal of Transport Economics and Policy 33 IssueID2 167–162
A. Charnes A.Y. Cooper W.W. Lewin L.M. Seiford (Eds) (1994) Data Envelopment Analysis: Theory, Methodology, and Application Klüwer Academic Publishers Dordrecht
A. Charnes W.W. Cooper E. Rhodes (1978) ArticleTitle“Measuring the Efficiency of Decision Making Units” European Journal of Operational Research 2 429–444
A. Charnes W.W. Cooper E. Rhodes (1979) ArticleTitle“Short Communication: Measuring the Efficiency of Decision Making Units” European Journal of Operational Research 3 339
D. Deprins D. Simar H. Tulkens (1984) Measuring Labor Efficiency in Post Offices M. Marchand P. Pestieau H. Tulkens (Eds) The Performance of Public Enterprises: Concepts and Measurements North Holland Amsterdam 243–267
M.J. Farrell (1957) ArticleTitle“The Measurement of Productive Efficiency” Journal of the Royal Statistical Society 120 253–281
J. Farrell C. Shapiro (1990) ArticleTitle“Horizontal Mergers: An Equilibrium Analysis” American Economic Review 80 107–126
R. Färe S. Grosskopf C.A.K. Lovell (1994) Production Frontiers Cambridge University Press Cambridge
R. Färe C.A.K. Lovell (1984) Aggregation and Efficiency W. Eichhorn (Eds) Measurement in Economics: Theory and Applications of Economic Indices Physica-Verlag Heidelberg 639–647
F. Försund L. Hjalmarsson (1979) ArticleTitle“Generalized Farrell Measures of Efficiency: An Application to Milk Processing in Swedish Dairy Plants” Economic Journal 89 294–315
C. Kao Y.C. Yang (1992) ArticleTitle“Reorganization of Forest Districts via Efficiency Measurement” European Journal of Operational Research 58 356–362
Y Lewin A. R.C. Morey (1981) ArticleTitle“Measuring the Relative Efficiency and Output Potential of Public Sector Organization: An Application of Data Envelopment Analysis” International Journal of Policy Analysis and Information Systems 5 267–285
T. Nilssen Sørgaard. L. (1998) ArticleTitle“Sequential Horizontal Mergers” European Economic Review 42 1683–1702
M.K. Perry R.H. Porter (1985) ArticleTitle“Oligopoly and the Incentives for Horizontal Merger” American Economic Review 75 219–227
N.C. Petersen (1990) ArticleTitle“Data Envelopment Analysis on a Relaxed Set of Assumptions” Management Science 36 305–314
J. Tirole (1988) The Theory of Industrial Organization MIT Press Cambridge, MA
H. Tulkens (1993) ArticleTitle“On FDH Efficiency Analysis: Some Methodological Issues and Applications to Retail Banking, Courts and Urban Transit” Journal of Productivity Analysis 4 183–210
Wang, D. (1997). Relative Performance of Advisory Service for the Danish Farmers: Using DEA to Advise the Advisors, Working Paper, Department of Agricultural Economics, The Royal Agricultural University, Copenhagen, Denmark
Y. Zhang R. Bertels (1998) ArticleTitle“The Effect of Sample Size on the Mean Efficiency in DEA with an Application to Electricity Distribution in Australia, Sweden and New Zealand” Journal of Productivity Analysis 9 187–204
Author information
Authors and Affiliations
Corresponding author
Additional information
JEL Classification: D20, L11, L22, P41, G34
Rights and permissions
About this article
Cite this article
Bogetoft, P., Wang, D. Estimating the Potential Gains from Mergers. J Prod Anal 23, 145–171 (2005). https://doi.org/10.1007/s11123-005-1326-7
Accepted:
Issue Date:
DOI: https://doi.org/10.1007/s11123-005-1326-7