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Plant Turnover and Demand Fluctuations in the Ready-Mix Concrete Industry

Allan Collard-Wexler ()

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Fluctuations in demand cause some plants to exit a market and other to enter. Would eliminating these ‡uctuations reduce plant turnover? A structural model of entry and exit in concentrated markets is estimated for the ready-mix concrete industry, using plant level data from the U.S. Census. The Nested Pseudo-Likelihood algorithm is used to …nd parameters which rationalize behavior of …rms involved in repeated competition. Due to high sunk costs, turnover rates would only be reduced by 3% by eliminating demand ‡uctuations at the county level, saving around 20 million dollars a year in scrapped capital. However, demand ‡uctuations blunt …rms’incentive to invest, reducing the number of large plants by more than 50%.

Pages: 53 pages
Date: 2006-03
New Economics Papers: this item is included in nep-ent
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https://www2.census.gov/ces/wp/2006/CES-WP-06-08.pdf First version, 2006 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:06-08

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