Chinese authorities announced continued efforts

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In? 2018, Chinese authorities announced continued efforts to reduce capacity in the cement? industry, often forcing producers to close plants. As cement is costly to transport and has significant economies of scale in? production, each urban area is a distinct oligopolistic market. If the Cournot model? applies, what effect will a reduction in the number of producers have on cement? prices? Before the? reduction, large cities would typically have 10 or more cement producers whereas most small cities would only have two or three. Assuming that all cities lost at least one producer and that most cities lost about? one-third of their? producers, would the likely price effect be more significant in smaller or larger? cities? A reduction in the number of producers will lower cement prices. The effect of a reduction in the number of producers will be more significant in smaller cities.

Reference no: EM134046372

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