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

Listed author(s):
  • Allan Collard-Wexler

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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File URL: ftp://ftp2.census.gov/ces/wp/2006/CES-WP-06-08.pdf
File Function: First version, 2006
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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
Handle: RePEc:cen:wpaper:06-08
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