Estimating the Effects on Costs of Telecommunications Mergers

21 Pages Posted: 10 Mar 2000

See all articles by Michael Gort

Michael Gort

SUNY at Buffalo, College of Arts & Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Nakil Sung

University of Seoul - Department of Economics

Abstract

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.

JEL Classification: L11, L96

Suggested Citation

Gort, Michael and Sung, Nakil, Estimating the Effects on Costs of Telecommunications Mergers. Available at SSRN: https://ssrn.com/abstract=164249 or http://dx.doi.org/10.2139/ssrn.164249

Michael Gort

SUNY at Buffalo, College of Arts & Sciences, Department of Economics ( email )

Buffalo, NY 14260
United States
716-645-2121 x 42 (Phone)
716-645-2127 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Nakil Sung (Contact Author)

University of Seoul - Department of Economics ( email )

90 Cheonnong-dong, Dongdaemun-gu
Seoul, 130-743
Korea
82-2-2210-2180 (Phone)
82-2-2210-5232 (Fax)

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