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Advertising and Markups: The Case of the German Brewing Industry

Simon Pröll (), Giannis Karagiannis and Klaus Salhofer ()
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Simon Pröll: University of Natural Resources and Life Sciences Vienna, Institute of Sustainable Economic Development
Giannis Karagiannis: University of Macedonia, Department of Economics

No 732019, Working Papers from Institute for Sustainable Economic Development, Department of Economics and Social Sciences, University of Natural Resources and Life Sciences, Vienna

Abstract: The beer market in Germany may be described as a monopolistic competition with many breweries supplying a very large variety of different beer styles and brands. Advertising is one means of differentiating a product and increasing prices over marginal costs. Based on production data obtained from a sample of 197 German breweries and thirteen years of observation, we derive firm-specific markups, profit ratios and prices in each year and relate those to their advertising expenditures and firm size. We are able to show that advertising expenditures are positively correlated to a brewery’s markup, profit ratio and price while firm size is negatively correlated.

Keywords: advertising; markup; imperfect competition; brewing (search for similar items in EconPapers)
JEL-codes: D22 L11 L66 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2019-07
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
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Persistent link: https://EconPapers.repec.org/RePEc:sed:wpaper:732019

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