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

• Autores: Nathan H. Miller, Matthew Osborne
• Localización: The Rand Journal of Economics, ISSN-e 1756-2171, Vol. 45, Nº. 2, 2014, págs. 221-247
• Idioma: inglés
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• Resumen

  • 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.