Spatial differentiation and price discrimination in the cement industry: evidence from a structural model.

We estimate a structural model of the cement industry that incorporates spatial differentiation and price discrimination, focusing on the US Southwest over 1983-2003. We leverage the structure of the model to obtain consistent estimates of the underlying parameters using data on market outcomes that...

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Detalles Bibliográficos
Publicado en:	RAND Journal of Economics (Wiley-Blackwell) Vol. 45; no. 2; pp. 221 - 248
Autores principales:	Miller, Nathan H., Osborne, Matthew
Formato:	Artículo
Publicado:	Wiley-Blackwell Summer2014
Materias:	United States Economic competition Cement industries Price discrimination Structural frame models Transportation costs Direct costing
Acceso en línea:	Ver este registro en EBSCOhost

Descripción
Sumario:	We estimate a structural model of the cement industry that incorporates spatial differentiation and price discrimination, focusing on the US Southwest over 1983-2003. We leverage the structure of the model to obtain consistent estimates of the underlying parameters using data on market outcomes that are substantially aggregated. Our results indicate that transportation costs around $0.46 per tonne-mile rationalize the data. This friction enables relatively isolated plants to obtain higher prices from nearby customers. We further find that disallowing price discrimination would create $30 million in consumer surplus annually and show how the model can identify suitable divestitures in merger analysis.