Advertising and Markups: The Case of the German Brewing Industry

Simon Pröll, Klaus Salhofer and Giannis Karagiannis

No DP-73-2019, Discussion Papers from University of Natural Resources and Life Sciences, Vienna, Department of Economics and Social Sciences, Institute for Sustainable Economic Development

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)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:inwedp:dp732019

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