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Is Divestiture Effective as a Merger Remedy in the U.S. Beer Industry?

Author

Listed:
  • Xiangrui Wang

    (Renmin University of China)

  • Ron C. Mittelhammer

    (Washington State University)

  • Thomas L. Marsh

    (Washington State University)

  • Jill J. McCluskey

    (Washington State University)

Abstract

Divestiture is a widely used policy instrument that regulators implement for mitigating the potentially negative market effects of mergers. Several recent studies have generated empirical evidence that supports the effectiveness of various divestiture mechanisms. We provide a case study in which divestiture resulted in the price of the divested brands’ increasing a small but significant amount following the merger. The case is the 2013 merger between Anheuser–Busch InBev and Grupo Modelo. A reduced-form retrospective difference-in-difference estimation approach is used in the analysis. The conclusions of our study underscore the critical nature of idiosyncratic market details that can substantially affect the effectiveness of the use of divestiture for addressing negative market effects of mergers.

Suggested Citation

  • Xiangrui Wang & Ron C. Mittelhammer & Thomas L. Marsh & Jill J. McCluskey, 2023. "Is Divestiture Effective as a Merger Remedy in the U.S. Beer Industry?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(1), pages 1-18, February.
    • Handle: RePEc:kap:revind:v:62:y:2023:i:1:d:10.1007_s11151-022-09888-5
    DOI: 10.1007/s11151-022-09888-5
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    References listed on IDEAS

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    Cited by:

    1. Patrice Bougette & Oliver Budzinski & Frédéric Marty, 2023. "In the Light of Dynamic Competition: Should We Make Merger Remedies More Flexible?," Working Papers AFED 23-01, Association Francaise d'Economie du Droit (AFED).
    2. Wesley Blundell & Kyle Wilson, 2023. "Acquisitions, product variety, and distribution in the U.S. craft beer industry," Economic Inquiry, Western Economic Association International, vol. 61(4), pages 1053-1076, October.

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    More about this item

    Keywords

    Divestiture; Retrospective merger analysis; Beer industry;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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