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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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