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

Building new plants or entering by acquisition? Firm heterogeneity and entry barriers in the U.S.... 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Rand Journal of Economics Wiley

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

Perez‐Saiz, Hector
The Rand Journal of Economics , Volume 46 (3) – Sep 1, 2015
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References (35)

Publisher
Wiley
Copyright
© 2015 The RAND Corporation
ISSN
0741-6261
eISSN
1756-2171
DOI
10.1111/1756-2171.12100
Publisher site
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Abstract

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.

Journal

The Rand Journal of Economics – Wiley

Published: Sep 1, 2015

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