The authors use data envelopment analysis to measure efficiency for US rail firms since deregulation, and assess whether mergers have improved efficiency. They model production in two stages. In the first, firms produce a network of track as an output. In the second, firms use track to produce shipments of goods. Mergers increase technical efficiency in the first stage, but reduce scale efficiency many merged firms are larger than efficient scale. Firms may merge to acquire market power from ownership of track. In the second stage, mergers have no effect on efficiency; efficiency has improved since deregulation, but not due to mergers.
Chapin et al. (Sat,) studied this question.
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