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

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  • Hector Perez-Saiz

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.

Suggested Citation

  • Hector Perez-Saiz, 2015. "Building new plants or entering by acquisition? Firm heterogeneity and entry barriers in the U.S. cement industry," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 625-649, September.
  • Handle: RePEc:bla:randje:v:46:y:2015:i:3:p:625-649
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    File URL: http://hdl.handle.net/10.1111/1756-2171.12100
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    References listed on IDEAS

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    Cited by:

    1. Guy Meunier & Jean-Pierre Ponssard & Francisco Ruiz-Alizeda, 2015. "Antitrust Versus Industrial Policies, Entry And Welfare," Working Papers hal-01117091, HAL.
    2. Hunold, Matthias & Hüschelrath, Kai & Laitenberger, Ulrich & Muthers, Johannes, 2017. "Competition, collusion and spatial sales patterns: Theory and evidence," ZEW Discussion Papers 17-035, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. Hong Zhu & Qi Zhu, 2016. "Mergers and acquisitions by Chinese firms: A review and comparison with other mergers and acquisitions research in the leading journals," Asia Pacific Journal of Management, Springer, vol. 33(4), pages 1107-1149, December.
    4. Pagnozzi, Marco & Rosato, Antonio, 2016. "Entry by takeover: Auctions vs. bilateral negotiations," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 68-84.

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