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Competition and Price Wars in the U.S. Brewing Industry*

Published online by Cambridge University Press:  10 August 2012

Jayendra Gokhale  and
Victor J. Tremblay
Jayendra Gokhale
Affiliation:
Department of Economics, 303 Ballard Extension Hall, Ohio State University, Corvallis, OR 97441-3612, email: gokhalej@onid.orst.edu.
Victor J. Tremblay
Affiliation:
Department of Economics, 303 Ballard Extension Hall, Ohio State University, Corvallis, OR 97441-3612, email: victor.tremblay@oregonstate.edu.
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Abstract

The behavior of the macro or mass-production segment of the U.S. brewing industry appears to be paradoxical. Since the end of Prohibition in 1934, the number of independent brewers has continuously declined while the major national brewers, such as Anheuser-Busch, Miller, and Coors, have gained market share. In spite of this decline in the number of competitors, profits and market power have remained low in brewing. Iwasaki et al. (2008) explain this result by providing evidence that changes in marketing and production technologies favored larger brewers and forced the industry into a war of attrition, in which only a handful of firms could survive. This led to fierce competition, especially from the 1960s through the mid 1980s. Since the late 1990s, the war appears to have subsided. Thus, the purpose of this study is to determine whether price competition diminished after the mid-1990s. We find evidence that competition has diminished but not enough to substantially increase market power. (JEL Classification: D22, L11, L66)

Type
Research Article
Information
Journal of Wine Economics , Volume 7 , Issue 2 , November 2012 , pp. 226 - 240
Copyright
Copyright © American Association of Wine Economists, 2012

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Footnotes

*

The authors thank Patrick Emerson, Todd Pugatch, Liz Schroeder, Dan Stone, Carol Tremblay, and an anonymous referee for their helpful comments on an earlier version of the paper.

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