Estimating the Effects on Costs of Telecommunications Mergers
SUNY at Buffalo, College of Arts & Sciences, Department of Economics; National Bureau of Economic Research (NBER)
University of Seoul - Department of Economics
The study focuses on forecasts of cost savings from merger based on an analysis of economies of scale for eight U.S. telephone companies providing mainly local service. Based on data for the period 1951-91, we conclude that cost savings from mergers and economies of scale are unlikely for large regional telephone companies in the United States. This conclusion is sustained after various adjustments are made to eliminate the distorting effect arising from the presence of excess capacity. Further analysis suggests that economies of scale associated with the use of capital are offset by other diseconomies. In particular, the evidence is not inconsistent with the conclusion that monitoring costs for labor offset scale economies in the use of capital.
Number of Pages in PDF File: 21
JEL Classification: L11, L96working papers series
Date posted: March 10, 2000
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