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Evaluating Coordinated Effects: An application to the US beer industry

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  • Beelitz, Frederik
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    Abstract

    The paper brings Friedman's (1971) collusive game to data and investigates whether the merger between the fifth and fourth largest brewer (G. Heileman and Stroh) of the US beer industry in the mid 1990's had a significant impact on the incentives to collude in the industry. It does so by firstly estimating a random coefficient Logit demand system for the US beer market. In a second step the demand estimates are used to conduct a merger simulation (Davis, 2006) quantifying coordinated effects of the merger. The results show that the change in the likelihood of collusion for the non merging parties was negligible, but significantly increased for the merged party.

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    File URL: http://purl.umn.edu/149941
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    Bibliographic Info

    Paper provided by University of Connecticut, Food Marketing Policy Center in its series Research Reports with number 149941.

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    Date of creation: Jul 2009
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    Handle: RePEc:ags:uconnr:149941

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    Keywords: Marketing;

    References

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    1. Kuhn, Kai-Uwe, 2002. "Technology choice and capital structure under rate regulation: Rejoinder," International Journal of Industrial Organization, Elsevier, vol. 20(2), pages 283-284, February.
    2. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    3. Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
    4. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
    5. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
    6. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, vol. 70(3), pages 1111-1153, May.
    7. Nevo, Aviv, 1998. "Measuring Market Power in the Ready-To-Eat Cereal Industry," Research Reports 25164, University of Connecticut, Food Marketing Policy Center.
    8. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, October.
    9. Pinkse, Joris & Slade, Margaret E., 2004. "Mergers, brand competition, and the price of a pint," European Economic Review, Elsevier, vol. 48(3), pages 617-643, June.
    10. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
    11. Aviv Nevo, 2000. "A Practitioner's Guide to Estimation of Random-Coefficients Logit Models of Demand," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 513-548, December.
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