Hysteresis of plant closures and reopenings in the UK Brick Industry: real options and/or strategy

In this paper we analyse industry dynamics in the UK bricks industry. This is an industry characterised by conditions that predict real options type behaviour in entry and exit. In addition, strategic interactions are likely. The market structure is oligopolistic and the existence of spatial competition due to high transport costs may favour pre-emption. We find evidence that uncertainty delays the decision to open and close plants, though this effect appears to be non-linear for the decision to open. We find (limited) evidence for pre-emption. There is also support for other predictions of strategic behaviour such as differential probability of entry and exit depending on market share and history of acquisition activity.