Mergers, brand competition, and the price of a pint

Mergers in the UK brewing industry have reduced the number of national brewers from six to four. The number of brands, in contrast, has remained relatively constant. We analyze the effects of mergers on brand competition and pricing. Brand-level demand equations are estimated from a panel of draft beers. To model brand-substitution possibilities, we estimate the matrix of cross-price elasticities semparametrically. Our structural model is used to assess the strength of brand competition along various dimensions and to evaluate the mergers. In particular, we compute equilibria of pricing games with different numbers of players. (C) 2003 Elsevier B.V. All rights reserved.