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Brewed in North America: Mergers, marginal costs, and efficiency

Paul Grieco, Joris Pinkse and Margaret Slade ()

International Journal of Industrial Organization, 2018, vol. 59, issue C, 24-65

Abstract: We show how production and pricing data can be used to estimate merger-related efficiencies using pre-merger data, and we assess the changes in efficiency and marginal costs that are expected to occur post-merger. To do this, we jointly estimate firm level returns to scale, technical change, TFP growth, and price-cost markups. We implement our empirical model using data for the North American (US and Canadian) brewing industry, and we use the estimated model of firm technology to evaluate the changes that are associated with the merger between Molson and Coors. We forecast nontrivial increases in returns to scale and declines in marginal costs and we verify those results by analyzing the impact of the merger retrospectively using post-merger data.

Keywords: Mergers; Efficiencies; Marginal costs; Returns to scale; Technical change; Productivity (search for similar items in EconPapers)
JEL-codes: D22 D24 L49 L66 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:indorg:v:59:y:2018:i:c:p:24-65