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
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
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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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