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Advertising and Markups: The Case of the German Brewing Industry

Author

Listed:
  • Simon Pröll

    () (University of Natural Resources and Life Sciences Vienna, Institute of Sustainable Economic Development)

  • Giannis Karagiannis

    () (University of Macedonia, Department of Economics)

  • Klaus Salhofer

    () (University of Natural Resources and Life Sciences Vienna, Institute of Sustainable Economic Development)

Abstract

The beer market in Germany may be described as a monopolistic competition with many breweries supplying a very large variety of different beer styles and brands. Advertising is one means of differentiating a product and increasing prices over marginal costs. Based on production data obtained from a sample of 197 German breweries and thirteen years of observation, we derive firm-specific markups, profit ratios and prices in each year and relate those to their advertising expenditures and firm size. We are able to show that advertising expenditures are positively correlated to a brewery’s markup, profit ratio and price while firm size is negatively correlated.

Suggested Citation

  • Simon Pröll & Giannis Karagiannis & Klaus Salhofer, 2019. "Advertising and Markups: The Case of the German Brewing Industry," Working Papers 732019, Institute for Sustainable Economic Development, Department of Economics and Social Sciences, University of Natural Resources and Life Sciences, Vienna.
  • Handle: RePEc:sed:wpaper:732019
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    advertising; markup; imperfect competition; brewing;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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