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:	eng
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