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Since partial deregulation in 1980, there has been a massive consolidation of firms in the U.S. railroad industry premised largely on efficiency gains. We estimate a cost function and use it to calculate cost effects for specific mergers and for all mergers at the industry level from 1983–2003. Our central results are that consolidation in the railroad industry accounts for about an 11.4 percent reduction in industry costs (more than $4 Billion in 1992 prices), and that while there are tremendous differences across mergers with respect to the direction, level, timing, and source of cost impacts, most mergers result in cost savings. Copyright Springer Science+Business Media, LLC 2007Deregulation, Railroads, Mergers,