Mergers and sunk costs: An application to the ready-mix concrete industry


Journal Article

Horizontal mergers have a large impact by inducing a long-lasting change in market structure. Only in an industry with substantial entry barriers is a merger not immediately counteracted by postmerger entry. To evaluate the duration of the effects of a merger, I use the model of Abbring and Campbell (2010) to estimate demand thresholds for entry and for exit. These thresholds, along with the process for demand, are estimated using data from the ready-mix concrete industry. Simulations predict that a merger from duopoly to monopoly generates between nine and ten years of monopoly in the market.

Full Text

Duke Authors

Cited Authors

  • Collard-Wexler, A

Published Date

  • January 1, 2014

Published In

Volume / Issue

  • 6 / 4

Start / End Page

  • 407 - 447

Electronic International Standard Serial Number (EISSN)

  • 1945-7685

International Standard Serial Number (ISSN)

  • 1945-7669

Digital Object Identifier (DOI)

  • 10.1257/mic.6.4.407

Citation Source

  • Scopus