Advanced Search
MyIDEAS: Login to save this paper or follow this series

Building New Plants or Entering by Acquisition? Estimation of an Entry Model for the U.S. Cement Industry

Contents:

Author Info

  • Hector Perez-Saiz

Abstract

In many industries, firms usually have two choices when expanding into new markets: They can either build a new plant (greenfield entry) or they can acquire an existing incumbent. The U.S. cement industry is a clear example. For this industry, I study the effect of two policies on the entry behavior and industry equilibrium: An asymmetric environmental policy that creates barriers to greenfield entry and a policy that creates barriers to entry by acquisition (like an antitrust policy). In the U.S. cement industry, the comparative advantage (e.g., TFP or size) of entrants versus incumbents and the regulatory entry barriers are important factors that determine the means of expansion. To model this industry, I use a perfect information static entry game. To estimate the supply and demand primitives of my model, I apply a recent estimator of discrete games to a rich database of the U.S. Census of Manufactures for the years 1963-2002. In my counterfactual analyses, I find that a less favorable environment for mergers during the Reagan-Bush administration would decrease the acquired plants by 70% and increase the new plants by 20%. Also, I find that the Clean Air Act Amendments of 1990 increased the number of acquisitions by 7.8%. Furthermore, my simulations suggest that regulations that create barriers to greenfield entry are less favorable in terms of welfare than regulations that create barriers to entry by acquisition. Finally, I demonstrate how my parameter estimates change when I apply the traditional approach in the entry literature where entry by acquisition is not considered, and when using a simple OLS estimation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: ftp://ftp2.census.gov/ces/wp/2010/CES-WP-10-08.pdf
File Function: First version, 2010
Download Restriction: no

Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 10-08.

as in new window
Length: 57 pages
Date of creation: Apr 2010
Date of revision:
Handle: RePEc:cen:wpaper:10-08

Contact details of provider:
Postal: 4600 Silver Hill Road, Washington, DC 20233
Phone: (301) 763-6460
Fax: (301) 763-5935
Email:
Web page: http://www.census.gov/ces
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Timothy Dunne & Shawn Klimek & James Schmitz, Jr., 2010. "Competition and Productivity: Evidence from the Post WWII U.S. Cement Industry," Working Papers, Center for Economic Studies, U.S. Census Bureau 10-29, Center for Economic Studies, U.S. Census Bureau.
  2. Guy Meunier & Jean-Pierre Ponssard & Catherine Thomas, 2013. "Capacity Investment under Demand Uncertainty: The Role of Imports in the U.S. Cement Industry," Working Papers hal-00816410, HAL.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cen:wpaper:10-08. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fariha Kamal).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.