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Impact of mandated exclusive territories in the US brewing industry: Evidence from scanner level data

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  • Burgdorf, Jacob

Abstract

I examine the competitive effects of mandated exclusive territories in the US beer industry. Theory is ambiguous as to the competitive impacts of this vertical practice. Using scanner data from a large number of grocery stores, I empirically examine the impact on beer prices, quantities, and number of brands sold after Wisconsin mandated that brewers must assign exclusive wholesale territories in 2006. Reduced form results from a differences-in-differences model using several control groups and a synthetic control show that the mandates increased prices and reduced quantity of craft beer. Overall number of brands sold decreased as well and craft brewers were the most negatively impacted. Findings suggest that the mandate gave protection to wholesalers and caused an increase in the costs of distribution and reduced competition in the brewing industry.

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  • Burgdorf, Jacob, 2019. "Impact of mandated exclusive territories in the US brewing industry: Evidence from scanner level data," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 376-416.
    • Handle: RePEc:eee:indorg:v:63:y:2019:i:c:p:376-416
    DOI: 10.1016/j.ijindorg.2018.12.001
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    Cited by:

    1. Vaziri, M., 2022. "Antitrust Law and Business Dynamism," Cambridge Working Papers in Economics 2243, Faculty of Economics, University of Cambridge.
    2. Jacob Burgdorf, 2021. "The strategic impact of voluntary vs. mandated vertical restraints and termination restrictions on exclusion of rivals," Journal of Regulatory Economics, Springer, vol. 59(1), pages 94-107, February.
    3. Cole, Matthew T. & McCullough, Michael, 2023. "California beer price posting: An exploratory analysis of pricing along the supply chain," Journal of Wine Economics, Cambridge University Press, vol. 18(3), pages 205-225, August.
    4. Witham, Adam & Leite, Brian, 2023. "Business is Hopping: The Effects of Deregulation on Southern Craft Beer," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 53(1), January.
    5. Wesley Blundell & Kyle Wilson, 2023. "Acquisitions, product variety, and distribution in the U.S. craft beer industry," Economic Inquiry, Western Economic Association International, vol. 61(4), pages 1053-1076, October.
    6. Kenneth G. Elzinga & Alexander J. McGlothlin, 2022. "Has Anheuser-Busch Let the Steam Out of Craft Beer? The Economics of Acquiring Craft Brewers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(2), pages 147-173, March.
    7. Aaron J. Staples & Dustin Chambers & Trey Malone, 2022. "How many regulations does it take to get a beer? The geography of beer regulations," Regulation & Governance, John Wiley & Sons, vol. 16(4), pages 1197-1210, October.

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    More about this item

    Keywords

    Vertical relations; Exclusive territories; Regulation; Brewing industry;
    All these keywords.

    JEL classification:

    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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