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Efficiencies Brewed: Pricing and Consolidation in the U.S. Beer Industry

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  • Orley C. Ashenfelter
  • Daniel Hosken
  • Matthew C. Weinberg

Abstract

Merger efficiencies provide the primary justification for why mergers of competitors may benefit consumers. Surprisingly, there is little evidence that efficiencies can offset incentives to raise prices following mergers. We estimate the effects of increased concentration and efficiencies on pricing by using panel scanner data and geographic variation in how the merger of Miller and Coors breweries was expected to increase concentration and reduce costs. All else equal, the average predicted increase in concentration lead to price increases of two percent, but at the mean this was offset by a nearly equal and opposite efficiency effect.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19353.

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Date of creation: Aug 2013
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Handle: RePEc:nbr:nberwo:19353

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  1. Jason Allen & Robert Clark & Jean-Fran├žois Houde, 2013. "The Effect of Mergers in Search Market: Evidence from the Canadian Mortgage Industry," NBER Working Papers 19126, National Bureau of Economic Research, Inc.
  2. John Asker, 2004. "Diagnosing Foreclosure Due to Exclusive Dealing," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 04-36, New York University, Leonard N. Stern School of Business, Department of Economics.
  3. Jean-Francois Houde, 2012. "Spatial Differentiation and Vertical Mergers in Retail Markets for Gasoline," American Economic Review, American Economic Association, American Economic Association, vol. 102(5), pages 2147-82, August.
  4. John Simpson & Christopher Taylor, 2008. "Do Gasoline Mergers Affect Consumer Prices? The Marathon Ashland Petroleum and Ultramar Diamond Shamrock Transaction," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 51(1), pages 135-152, 02.
  5. Borenstein, Severin, 1990. "Airline Mergers, Airport Dominance, and Market Power," American Economic Review, American Economic Association, American Economic Association, vol. 80(2), pages 400-404, May.
  6. Paola Sapienza, 2002. "The Effects of Banking Mergers on Loan Contracts," Journal of Finance, American Finance Association, American Finance Association, vol. 57(1), pages 329-367, 02.
  7. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 549-69, June.
  8. Prager, Robin A & Hannan, Timothy H, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence from the Banking Industry," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 46(4), pages 433-52, December.
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Cited by:
  1. Orley C. Ashenfelter & Daniel Hosken & Matthew C. Weinberg, 2014. "Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers," NBER Working Papers 19939, National Bureau of Economic Research, Inc.

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