Efficiencies brewed: pricing and consolidation in the US beer industry

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...

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Bibliographic Details
Published in:The Rand journal of economics 2015-06, Vol.46 (2), p.328-361
Main Authors: Ashenfelter, Orley C., Hosken, Daniel S., Weinberg, Matthew C.
Format: Article
Language:English
Subjects:
Acquisitions & mergers
Average prices
Beer
Beer industry
Beers
Brands
Breweries
Brewing
Consumers
Cost reduction
Economic concentration
Economic efficiency
Efficiency
Geographic location
Geographic regions
Herfindahl Hirschman index
Industry
Lagers
Market prices
Mergers
Price increases
Pricing
Studies
U.S.A
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Summary: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 the brewers Miller and Coors was expected to increase concentration and reduce costs. All else equal, the average predicted increase in concentration led to price increases of 2%, but at the mean this was offset by a nearly equal and opposite efficiency effect.
ISSN:0741-6261
1756-2171
DOI:10.1111/1756-2171.12092