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

Author

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  • Gokhale, Jayendra
  • Tremblay, Victor J.

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)

Suggested Citation

  • Gokhale, Jayendra & Tremblay, Victor J., 2012. "Competition and Price Wars in the U.S. Brewing Industry," Journal of Wine Economics, Cambridge University Press, vol. 7(2), pages 226-240, November.
    • Handle: RePEc:cup:jwecon:v:7:y:2012:i:02:p:226-240_00
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    Citations

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    Cited by:

    1. Jeff Luckstead & Stephen Devadoss, 2021. "Taste renaissance, tax reform, and industrial organization of the beer industry," Economic Inquiry, Western Economic Association International, vol. 59(4), pages 1702-1722, October.
    2. Toro-Gonzalez, Daniel & McCluskey, Jill J. & Mittelhammer, Ron, 2014. "Beer Snobs Do Exist: Estimation of Beer Demand by Type," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 39(2), pages 1-14.
    3. Vinish Shrestha & Sara Markowitz, 2016. "The Pass-Through Of Beer Taxes To Prices: Evidence From State And Federal Tax Changes," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1946-1962, October.
    4. Sanjib Bhuyan, 2014. "Visiting an old battleground in empirical industrial organization: SCP versus NEIO," Applied Economics Letters, Taylor & Francis Journals, vol. 21(11), pages 751-754, July.
    5. Luckstead,, Jeff & Devadoss, Stephen, 2022. "Taste Renaissance, Tax Reform, and Industrial Organization of the Beer Industry," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322138, Agricultural and Applied Economics Association.

    More about this item

    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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