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

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  • Allan Collard-Wexler

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%.

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Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 06-08.

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Length: 53 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:cen:wpaper:06-08

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Citations

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Cited by:
  1. Michaela Draganska & Sanjog Misra & Victor Aguirregabiria & Pat Bajari & Liran Einav & Paul Ellickson & Dan Horsky & Sridhar Narayanan & Yesim Orhun & Peter Reiss & Katja Seim & Vishal Singh & Raphael, 2008. "Discrete choice models of firms’ strategic decisions," Marketing Letters, Springer, vol. 19(3), pages 399-416, December.
  2. Ulrich Doraszelski & Mark Satterthwaite, 2007. "Computable Markov-Perfect Industry Dynamics: Existence, Purification, and Multiplicity," Levine's Bibliography 321307000000000912, UCLA Department of Economics.
  3. Andrew Figura, 2006. "Why Are Plant Deaths Countercyclical: Reallocation Timing or Fragility?," Working Papers 06-24, Center for Economic Studies, U.S. Census Bureau.
  4. Joao Macieira, 2010. "Oblivious Equilibrium in Dynamic Discrete Games," 2010 Meeting Papers 680, Society for Economic Dynamics.
  5. Dunne, Timothy & Klimek, Shawn D. & Roberts, Mark J. & Xu, Daniel Yi, 2013. "Entry, exit, and the determinants of market structure," Working Paper 2013-10, Federal Reserve Bank of Atlanta.
  6. Andrew Figura, 2006. "Why are plant deaths countercyclical: reallocation timing or fragility?," Finance and Economics Discussion Series 2006-31, Board of Governors of the Federal Reserve System (U.S.).
  7. Timothy Dunne & Mark Roberts & Shawn Klimek & Yi Xu, 2007. "The Dynamics of Market Structure and Market Size in Two Health Services Industries," Working Papers 07-26, Center for Economic Studies, U.S. Census Bureau.
  8. Doraszelski, Ulrich & Satterthwaite, Mark, 2007. "Computable Markov-Perfect Industry Dynamics: Existence, Purification, and Multiplicity," CEPR Discussion Papers 6212, C.E.P.R. Discussion Papers.
  9. Timothy Dunne & Shawn Klimek & James Schmitz, Jr., 2010. "Competition and Productivity: Evidence from the Post WWII U.S. Cement Industry," Working Papers 10-29, Center for Economic Studies, U.S. Census Bureau.
  10. Carlos Daniel Santos, 2009. "Recovering the sunk costs of R&D: the moulds industry case," LSE Research Online Documents on Economics 28689, London School of Economics and Political Science, LSE Library.
  11. Andrew Sweeting, 2007. "Dynamic Product Repositioning in Differentiated Product Markets: The Case of Format Switching in the Commercial Radio Industry," NBER Working Papers 13522, National Bureau of Economic Research, Inc.

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