Entry and Exit in the Ready-Mix Concrete Industry

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The ready-mix concrete industry is a fascinating laboratory for the study of industry dynamics. Concrete plants produce a single homogeneous product with technology and equipment that has changed little over the last 50 years. Building a plant entails substantial sunk costs since the machinery used to produce ready-mix cannot easily be transported to a new location. Nevertheless 6% of plants will enter or exit the market in any given year. Because of high transportation costs for ready-mix concrete, markets for ready-mix concrete are geographically segmented. Thus the evolution of a broad cross-section of markets can be examined. The first chapter constructs data on the ready-mix concrete industry using data collected by the U.S. Census Bureau. In chapter 2, I look at the importance of demand fluctuations in generating the observed entry and exit patterns in the industry. Chapter 3 estimates static models of entry which incorporate both previous entry decisions and market-level unobserved heterogeneity. Chapter 4 examines the role of sunk costs and volatility of efficiency in explaining the wide dispersion of productivity observed in the industry.

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  • 06/26/2018
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