Investigations of Market Power in the U.S. Beer Industry

The objective of this study is to evaluate the extent to which consolidation, through mergers and acquisitions in the beer industry, have influenced the structure and competitive nature of the market during the first decade of the 21st century. I am specifically interested in three key components of synergy that affect both merging and non-merging firms: market power, revenue enhancement, and post-merger pricing structure. To accomplish this task, I use a discrete choice behavior model to estimate a robust and flexible demand model that accounts for individual consumer heterogeneity and allows for correlated tastes across different product characteristics. The demand results are obtained by evaluating 39 distinct geographic regions in the United States from 2001 to 2011, during which seven firms sold 13 flagship brands and 26 individual products. I will then take the estimated demand parameters, assuming they are now exogenous, and estimate a model of industry conduct that accounts for temporal change and heterogeneity across firms. The results shed light on the evolving market structure during the study period and uncover what appears to be evidence of coordinated behavior between Heineken USA and Groupo Modelo.