Get access

PRICE COMPETITION IN U.S. BREWING

Authors


  • *I am indebted to Catherine Eckel for her encouragement, support and constructive comments. I thank Everett Peterson for his collaboration in related work and Victor Tremblay for his helpful comments. The Editor and two referees provided suggestions that have substantially improved this paper. I also thank Ronald Cotterill, Director of the Food Marketing Policy Research Center at the University of Connecticut for making IRI and LNA data available. Research and travel grants from the Department of Economics at Virginia Tech are acknowledged.

Abstract

This study utilizes a brand-level dataset that captures a unique natural experiment, a 100% increase in the excise tax, to evaluate different pricing models in the U.S. beer industry. To assess the plausibility of different models, the increase in marginal cost resulting from the tax increase is exploited: observed prices in the post-increase period are compared to the prices that should be observed under various pricing models. Three types of models are analyzed: Bertrand-Nash, leadership, and collusion. Results indicate that extreme cases of collusion can be confidently ruled out while several models may explain the observed prices equally well.

Get access to the full text of this article

Ancillary