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An empirical testing of leverage effects via the common distribution network

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  • Park, Sangin

Abstract

The paper aims to empirically test the significance of leverage effects via the common distribution network in the conglomerate mergers between beer and soju manufacturers of Korea in the time period of 1994-2003. In this paper, a beer (or soju) manufacturer's ability to push the sales of soju (or beer) products via the common regional liquor distribution network is measured by the beer (or soju) firm's market share in the region. If the leverage effect is significant, we expect consumer choices to be significantly affected by the merged firm's ability to push. For a consistent estimation of the leverage effect on consumer demands, this paper adapts a logistic demand function for Yellow Pages in Rysman [Rysman, M. (2004). Competition between networks: A study of the market for yellow pages. Review of Economic Studies, 71, 483-512], controlling other demand-side variables such as prices, consumer loyalty, quality and the introduction of new products. The hypothesis test results indicate that the leverage effects via the common distribution network were not significant at the significance level of 0.1. This conclusion is robust to different specifications of leverage effects and the number of potential drinking.

Suggested Citation

  • Park, Sangin, 2009. "An empirical testing of leverage effects via the common distribution network," International Review of Law and Economics, Elsevier, vol. 29(2), pages 143-152, June.
    • Handle: RePEc:eee:irlaec:v:29:y:2009:i:2:p:143-152
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    References listed on IDEAS

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