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An empirical testing of leverage effects via the common distribution network

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  • Park, Sangin
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    Abstract

    The paper aims to empirically test the significance of leverage effects via the common distribution network in the conglomerate mergers between beer and soju manufacturers of Korea in the time period of 1994-2003. In this paper, a beer (or soju) manufacturer's ability to push the sales of soju (or beer) products via the common regional liquor distribution network is measured by the beer (or soju) firm's market share in the region. If the leverage effect is significant, we expect consumer choices to be significantly affected by the merged firm's ability to push. For a consistent estimation of the leverage effect on consumer demands, this paper adapts a logistic demand function for Yellow Pages in Rysman [Rysman, M. (2004). Competition between networks: A study of the market for yellow pages. Review of Economic Studies, 71, 483-512], controlling other demand-side variables such as prices, consumer loyalty, quality and the introduction of new products. The hypothesis test results indicate that the leverage effects via the common distribution network were not significant at the significance level of 0.1. This conclusion is robust to different specifications of leverage effects and the number of potential drinking.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Review of Law and Economics.

    Volume (Year): 29 (2009)
    Issue (Month): 2 (June)
    Pages: 143-152

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    Handle: RePEc:eee:irlaec:v:29:y:2009:i:2:p:143-152

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    Web page: http://www.elsevier.com/locate/irle

    Related research

    Keywords: Leverage effect Common distribution network Conglomerate merger;

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    1. Aviv Nevo, 1998. "Measuring Market Power in the Ready-to-Eat Cereal Industry," NBER Working Papers 6387, National Bureau of Economic Research, Inc.
    2. Schmalensee, Richard, 1982. "Commodity Bundling by Single-Product Monopolies," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 67-71, April.
    3. McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 371-83, May.
    4. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
    5. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August.
    6. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
    7. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
    8. Marc Rysman, 2004. "Competition Between Networks: A�Study of the Market for Yellow�Pages," Review of Economic Studies, Wiley Blackwell, vol. 71(2), pages 483-512, 04.
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