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dc.contributor.authorPonssard, Jean-Pierreen_US
dc.contributor.authorThomas, Catherineen_US
dc.date.accessioned2010-11-11en_US
dc.date.accessioned2011-06-29T11:19:12Z-
dc.date.available2011-06-29T11:19:12Z-
dc.date.issued2010en_US
dc.identifier.urihttp://hdl.handle.net/10419/46443-
dc.description.abstractUncertainty about the level of demand is thought to influence irreversible capacity decisions. This paper examines some implications of the theory literature on this topic in an empirical study of the US cement industry between 1994 and 2006. Firms in this sector have the ability to deliver cement either from domestic plants or from imports. Since cement is costly to transport via land, the difference in marginal cost between local production and imports varies across local markets. The marginal cost of imports is lower in areas with access to a sea port, decreasing the relative value of investing in local capacity sufficient to supply positive local demand shocks. In the presence of uncertain demand, firms may choose to serve these markets via both domestic production and imports. Consistent with the theory, we find a negative relationship between the average level of excess capacity and demand volatility only for coastal areas. An increase in demand volatility is associated with an increase in excess capacity only in landlocked areas. More generally, the paper shows that the cost of imports relative to the cost of domestic production affects the relationship between uncertainty and domestic capacity decisions. The results suggest that a unilateral climate policy in the US may induce a partial international relocation of capacity in carbon intensive industries, such as cement, by increasing the relative cost of domestic production.en_US
dc.language.isoengen_US
dc.publisherCESifo Münchenen_US
dc.relation.ispartofseriesCESifo working paper: Industrial Organisation 3166en_US
dc.subject.jelD24en_US
dc.subject.jelD81en_US
dc.subject.jelF18en_US
dc.subject.jelL61en_US
dc.subject.ddc330en_US
dc.subject.keywordcapacity investmenten_US
dc.subject.keyworddemand uncertaintyen_US
dc.subject.keywordimportsen_US
dc.subject.keywordcementen_US
dc.subject.stwZementindustrieen_US
dc.subject.stwProduktionskapazitäten_US
dc.subject.stwInvestitionen_US
dc.subject.stwEntscheidung bei Unsicherheiten_US
dc.subject.stwZementen_US
dc.subject.stwNachfrageen_US
dc.subject.stwImporten_US
dc.subject.stwTransportkostenen_US
dc.subject.stwKlimaschutzen_US
dc.subject.stwWirkungsanalyseen_US
dc.subject.stwUSAen_US
dc.titleCapacity investment under demand uncertainty: An empirical study of the US cement industry, 1994-2006en_US
dc.typeWorking Paperen_US
dc.identifier.ppn638861403en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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