U.S. Brewing Industry Profitability: A Simultaneous Determination of Structure, Conduct, and Performance

Bhuyan Sanjib () and McCafferty Michael ()
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Bhuyan Sanjib: Department of Agricultural, Food and Resource Economics, Rutgers University, New Brunswick, NJ, USA
McCafferty Michael: Department of Agricultural, Food and Resource Economics, Rutgers University, New Brunswick, NJ, USA

Journal of Agricultural & Food Industrial Organization, 2013, vol. 11, issue 1, 139-150

Abstract: The U.S. brewing industry plays an important role in the U.S. economy. Although the number of firms has increased in the industry, the industry overall has remained very concentrated, with a three-firm concentration ratio of 81% in 2000 (Stack 2000). Increasing concentration in the U.S brewing industry raises public policy concerns due to the potential impact of concentration on market performance and efficiency, for example, the recent decision by the U.S. Department of Justice (DOJ) to block the proposed merger between AB–InBev and Mexico’s Groupo Modelo. Employing an improved version of the structure-conduct-performance (SCP) approach, we examine the relationship between concentration and profitability in the U.S. brewing industry. Our results support the hypothesis that market concentration impacts market performance. We, however, did not address the issue of collusive conduct or market power explicitly.

Keywords: brewing industry; SCP; oligopoly; profitability; market power (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1515/jafio-2013-0008

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