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Price Competition In U.S. Brewing

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  • CHRISTIAN ROJAS

Abstract

This study utilizes a brand‐level dataset that captures a unique natural experiment, a 100% increase in the excise tax, to evaluate different pricing models in the U.S. beer industry. To assess the plausibility of different models, the increase in marginal cost resulting from the tax increase is exploited: observed prices in the post‐increase period are compared to the prices that should be observed under various pricing models. Three types of models are analyzed: Bertrand‐Nash, leadership, and collusion. Results indicate that extreme cases of collusion can be confidently ruled out while several models may explain the observed prices equally well.

Suggested Citation

  • Christian Rojas, 2008. "Price Competition In U.S. Brewing," Journal of Industrial Economics, Wiley Blackwell, vol. 56(1), pages 1-31, March.
    • Handle: RePEc:bla:jindec:v:56:y:2008:i:1:p:1-31
    DOI: 10.1111/j.1467-6451.2008.00330.x
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    References listed on IDEAS

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    1. Sofia Berto Villas-Boas, 2007. "Vertical Relationships between Manufacturers and Retailers: Inference with Limited Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(2), pages 625-652.
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    Cited by:

    1. Thomas Bittmann & Jens‐Peter Loy & Sven Anders, 2020. "Product differentiation and cost pass‐through: industry‐wide versus firm‐specific cost shocks," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(4), pages 1184-1209, October.
    2. Martin Peitz & Markus Reisinger, 2014. "Indirect Taxation in Vertical Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 62(4), pages 709-755, December.
    3. Anna Laura Baraldi & Christian Rojas, 2011. "Cost Pass-Through with Network Externalities," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 10(3), pages 177-199, December.
    4. Affeldt, P. & Argentesi, E. & Filistrucchi, Lapo, 2021. "Estimating Demand with Multi-Homing in Two-Sided Markets," Other publications TiSEM 1317bf39-d02e-4f61-a34f-e, Tilburg University, School of Economics and Management.
    5. Giannis Karagiannis & Magnus Kellermann & Simon Pröll & Klaus Salhofer, 2018. "Markups and product differentiation in the German brewing sector," Agribusiness, John Wiley & Sons, Ltd., vol. 34(1), pages 61-76, December.
    6. Weiss, Christoph, 2020. "Preisbildung bei unvollkommener Konkurrenz," IAMO Discussion Papers 305467, Institute of Agricultural Development in Transition Economies (IAMO).
    7. Dongling Huang & Christian Rojas & Frank Bass, 2008. "What Happens When Demand Is Estimated With A Misspecified Model?," Journal of Industrial Economics, Wiley Blackwell, vol. 56(4), pages 809-839, December.
    8. Otsu, Taisuke & Sunada, Keita, 2024. "On large market asymptotics for spatial price competition models," LSE Research Online Documents on Economics 120588, London School of Economics and Political Science, LSE Library.
    9. Rojas Christian & Shi Tianji, 2011. "Tax Incidence When Quality Matters: Evidence from the Beer Market," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 9(1), pages 1-35, December.
    10. Jan De Loecker & Paul T. Scott, 2016. "Estimating market power Evidence from the US Brewing Industry," NBER Working Papers 22957, National Bureau of Economic Research, Inc.
    11. Chenarides, Lauren & Jaenicke, Edward C., 2016. "Store Choice and Consumer Behavior in Food Deserts: An Empirical Application of the Distance Metric Method," 2017 Allied Social Sciences Association (ASSA) Annual Meeting, January 6-8, 2017, Chicago, Illinois 250118, Agricultural and Applied Economics Association.
    12. Brester, Gary W. & McCullough, Michael & Atwood, Joseph & Austin, Caroline, 2023. "Beer Excise Taxes and the Craft Beverage and Modernization Tax Reform Act," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 48(2), May.
    13. Ryo Sakamoto & Kyle Stiegert, 2018. "Comparing competitive toughness to benchmark outcomes in retail oligopoly pricing," Agribusiness, John Wiley & Sons, Ltd., vol. 34(1), pages 44-60, December.
    14. Paul Scott, 2017. "Estimating Market Power: Evidence from the US Brewing Industry," 2017 Meeting Papers 389, Society for Economic Dynamics.
    15. Xabier Barriola, 2022. "The effect of competition on product removal," Marketing Letters, Springer, vol. 33(2), pages 203-214, June.
    16. Jan De Loecker & Paul T. Scott, 2016. "Estimating market power Evidence from the US Brewing Industry," NBER Working Papers 22957, National Bureau of Economic Research, Inc.
    17. Azar, José & Barriola, Xabier, 2022. "Did the MillerCoors joint venture strengthen the craft beer revolution?," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    18. Timothy J. Richards & Bradley J. Rickard, 2021. "Dynamic model of beer pricing and buyouts," Agribusiness, John Wiley & Sons, Ltd., vol. 37(4), pages 685-712, October.
    19. Bittmann, Thomas & Bronnmann, Julia & Gordon, Daniel V., 2020. "Product differentiation and dynamics of cost pass-through in the German fish market: An error-correction-distance measure approach," Journal of Commodity Markets, Elsevier, vol. 19(C).
    20. Ariel A. Casarin & Magdalena Cornejo & María Eugenia Delfino, 2020. "Market Power Absent Merger Review: Brewing in Perú," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 56(3), pages 535-556, May.
    21. Jeff Luckstead & Stephen Devadoss, 2021. "Taste renaissance, tax reform, and industrial organization of the beer industry," Economic Inquiry, Western Economic Association International, vol. 59(4), pages 1702-1722, October.
    22. Charles J. Romeo, 2016. "Incorporating Prior Information into A GMM Objective For Mixed Logit Demand Systems," Journal of Industrial Economics, Wiley Blackwell, vol. 64(2), pages 336-363, June.
    23. Mackay, Daniel, 2011. "Estimating the impact of investment tax credits on aircraft demand," MPRA Paper 32767, University Library of Munich, Germany.
    24. repec:zbw:iamodp:305467 is not listed on IDEAS
    25. Luckstead,, Jeff & Devadoss, Stephen, 2022. "Taste Renaissance, Tax Reform, and Industrial Organization of the Beer Industry," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322138, Agricultural and Applied Economics Association.

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