TY - JOUR
T1 - The effect of mergers on firms' costs
T2 - Evidence from the HMO industry
AU - Engberg, John
AU - Wholey, Douglas
AU - Feldman, Roger
AU - Christianson, Jon B.
PY - 2004/9/1
Y1 - 2004/9/1
N2 - We examine the effect of mergers on firms' costs, using a national data set that contains information on both pre- and post-merger costs for firms in the Health Maintenance Organization (HMO) industry. By utilizing data on all HMOs that operated in the United States from 1985 to 1997, we observe enough mergers to obtain estimates of both short-run and relatively permanent merger effects. On average, we do not find evidence that mergers allowed HMOs to realize greater economies of scale or that mergers improved efficiency by shifting the cost function. On the other hand, mergers between HMOs that produce Medicare and other products are likely to create dis-economies of scope that increase costs.
AB - We examine the effect of mergers on firms' costs, using a national data set that contains information on both pre- and post-merger costs for firms in the Health Maintenance Organization (HMO) industry. By utilizing data on all HMOs that operated in the United States from 1985 to 1997, we observe enough mergers to obtain estimates of both short-run and relatively permanent merger effects. On average, we do not find evidence that mergers allowed HMOs to realize greater economies of scale or that mergers improved efficiency by shifting the cost function. On the other hand, mergers between HMOs that produce Medicare and other products are likely to create dis-economies of scope that increase costs.
KW - Costs
KW - Efficiency
KW - Market structure
KW - Mergers
UR - http://www.scopus.com/inward/record.url?scp=10044294748&partnerID=8YFLogxK
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U2 - 10.1016/S1062-9769(03)00035-8
DO - 10.1016/S1062-9769(03)00035-8
M3 - Article
AN - SCOPUS:10044294748
VL - 44
SP - 574
EP - 600
JO - Quarterly Review of Economics and Finance
JF - Quarterly Review of Economics and Finance
SN - 1062-9769
IS - 4
ER -