How Does Advertising Depend on Competition? Evidence from U.S. Brewing

38 Pages Posted: 23 Jun 2015 Last revised: 20 Nov 2016

See all articles by Ambarish Chandra

Ambarish Chandra

University of Toronto - Rotman School of Management

Matthew Weinberg

Drexel University - Department of Economics & International Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 29, 2016

Abstract

The relationship between market structure and advertising has been extensively studied, but has generated sharply opposing theoretical predictions, as well as inconclusive empirical findings, likely due to severe endogeneity concerns. We exploit the 2008 merger of Miller and Coors in the U.S. brewing industry to examine how changes in local concentration affect firms' advertising behavior. Well-established regional preferences over beer brands, and the sharp increase in concentration from the merger, make this an excellent setting to analyze this question. We find a significant positive effect of local market concentration on advertising expenditures: a 100-point increase in the HHI measure of concentration increases advertising per capita by about 4%. Our findings shed light on how and when firms choose to deploy advertising.

Keywords: Advertising; Market Structure; Beer

JEL Classification: D4, M3

Suggested Citation

Chandra, Ambarish and Weinberg, Matthew, How Does Advertising Depend on Competition? Evidence from U.S. Brewing (October 29, 2016). Rotman School of Management Working Paper No. 2621899. Available at SSRN: https://ssrn.com/abstract=2621899 or http://dx.doi.org/10.2139/ssrn.2621899

Ambarish Chandra (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Matthew Weinberg

Drexel University - Department of Economics & International Business ( email )

3141 Chestnut St.
Philadelphia, PA 19104
United States

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