Allan Collard-Wexler

Assistant Professor of Economics, Stern School of Business

Research

Demand Fluctuations and Plant Turnover in Ready-Mix Concrete (Revise and Resubmit at Econometrica -posted 11/11/05)

Abstract:Fluctuations in demand cause some plants to exit a market and other to enter. Would eliminating these fluctuations 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 find parameters which rationalize behavior of firms involved in repeated competition. Due to high sunk costs, turnover rates would only be reduced by 3% by eliminating demand fluctuations at the county level, saving around 20 million dollars a year in scrapped capital. However, demand fluctuations blunt firms' incentive to invest, reducing the number of large plants by more than 50%.

The code used for this project in GAUSS is here .

Productivity Dispersion and Plant Selection in the Ready-Mix Concrete Industry (posted 09/20/07)

Abstract: Plant level productivity in the ready-mix concrete sector is highly dispersed, whereby a plant in the 75th percentile of the distribution produces four times the output as a plant in the 25th percentile. Is the magnitude of this dispersion real or simply an artifact of measurement error? Moreover, why don't inefficient producers exit the industry? Using a dynamic model of entry and exit, I find that a low productivity plant's profits are $300 000 less than a high productivity plant, i.e. a plant in the 25th percentile of productivity plant produces 20% less than a plant in the 75th percentile of productivity which uses the same inputs. Exit of innefficient producers is slowed by two factors. First, sunk costs are quite large in the ready-mix concrete industry, so a firm will remain in the industry even when it is currently making substantial losses. Second, plant productivity is very volatile, so current productivity is a weak signal of future profitability.

Using Panel Data to Estimate Entry Models (posted 09/9/06)

Abstract:Entry Models such as Bresnahan and Reiss(91) can underestimate the effect of competition. If the profitability of markets is mismeasured, this introduces an positive correlation between unoberserved profitability and the number of firms in a market. Using data on entry and exit patterns in the Ready-Mix Concrete Industry from 1976-1999, I show that using fixed effects in a Bresnahan-Reiss entry model reduces the coefficient on demand by 50% and increases the coefficient on competition by 100% compared to the no fixed-effect benchmark.

Mergers in Two-Sided Markets: An Application to the Canadian Newspaper Industry , joint with Ambarish Chandra.

Abstract: In this paper we study mergers in two-sided industries. While mergers have been studied extensively in traditional industries, and there is a large and rapidly evolving literature on two-sided markets, we believe that there has been almost no work done on exmining mergers in these markets. In this paper we attempt to fill this gap. We first present a simple model that shows that mergers in two-sided markets may not necesarily lead to higher prices. We then test our conclusions by examining a spate of mergers in the Canadian newspaper industry in the late 1990s. Specifically, we analyze prices for both circulation and advertising to try to understand the impact that these mergers had on consumer welfare. Our results do not support the notion that greater concentration led to higher prices on either side of the market.

Comment on Arradillas-Lopez and Tamer forthcoming in the Journal of Economics and Business Statistics.

Abstract:To illustrate the power and ease of Aradillas-Lopez and Tamer's approach, I will estimate a simple entry model in the spirit of \citet{Bresnahan-Reiss:JPE1991} using only the restrictions that players use rationalizable strategies, on data from the ready-mix concrete industry.

Back to home page.