ABSTRACT
The cement industry is a classic example of a concentrated-homogeneous industry, where entry is difficult. Despite that, there was an increase in the number of entrants in the Brazilian cement industry in recent years. The purpose of the present work is to identify the main factors that impacted regional entry decisions in the Brazilian cement market from 2003 to 2012. Another purpose is to explore possible causes for the incumbents' decision to accommodate new entry in these regions. Other studies that analyze the cement industry (Salvo, 2010Salvo, A. (2010). Inferring market power under the threat of entry: the case of the Brazilian cement industry. Rand Journal of Economics, 41(2), 326-350.; Miller & Osborne, 2014Miller, N. H., & Osborne, M. (2014). Spatial differentiation and price discrimination in the cement industry: evidence from a structural model. Rand Journal of Economics, 45(2), 221-489.; Zeidan & Resende, 2009Zeidan, R., & Resende, M. (2009). Measuring market conduct in the Brazilian cement industry: a dynamic econometric investigation. Review of Industrial Organization, 34(3), 231-244., 2010Zeidan, R., & Resende, M. (2010). Colusão ótima com monitoramento imperfeito: teste do modelo de Abreu-Pearce-Stachetti para os mercados brasileiros regionais de cimento. Economia Aplicada, 14(1), 41-50.; La Cour & Møllgaard, 2003La Cour, L. F., & Møllgaard, P. (2003). Market domination: tests applied to the Danish cement industry. European Journal of Law and Economics, 14, 99-127.), have not been focused on entry. The present work adds to the academic literature the behavior of Brazilian firms in concentrated market structures by focusing on and analisis of the entry in these markets. The main considered factors are: consumption, consumption growth, transportation cost, number of active firms, number of plants, and regional characteristics, in the period from 2003 to 2012. A logit model is used to estimate the impact of these factors on the likelihood of entry and incumbents' expansion. An exploratory analysis based on case discussion is also conducted on an attempt to explain the incumbents' behavior. The results indicate that in addition to regional characteristics, a high level of consumption, and a low market concentration - measured by the number of active firms or the number of existing plants by region - are the conditions that most significantly favor entry. The incumbents' expansion decision, on the other hand, is most strongly correlated with the potential for consumption growth, allowing entry to occur in the Brazilian regions with high levels of consumption but low levels of growth.
Entry strategies; Incumbent's strategies; Cement industry; Spatial competition; Concentration
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