Building new plants or entering by acquisition? Firm heterogeneity and entry barriers in the U.S. cement industry

Hector Perez-Saiz
Authors registered in the RePEc Author Service: Hector Perez Saiz (hperez-saiz@imf.org)

RAND Journal of Economics, 2015, vol. 46, issue 3, 625-649

Abstract: type="main">

I estimate a model of entry for the cement industry that considers two options of expansion: building a plant or acquiring an incumbent. The model takes into account that there is a transfer of the buyer firm-level characteristics to the acquired plants, which affects profits from the acquisition. Estimates show that a less-permissive Reagan–Bush administration's merger policy would decrease the number of acquired plants by 71%, greenfield entry would increase by 9.2% and consumer surplus would decrease by 23.5%. Results suggest that regulators should be concerned about policies that negatively affect the efficient reallocation of assets between incumbents and entrants.

Date: 2015
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Citations: View citations in EconPapers (14)

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