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

41 Pages Posted: 6 Jul 2017

See all articles by Ambarish Chandra

Ambarish Chandra

University of Toronto - Rotman School of Management

Matthew Weinberg

The Ohio State University, Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 3, 2017

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 5%. Our findings shed light on how and when firms choose to deploy advertising.

Suggested Citation

Chandra, Ambarish and Weinberg, Matthew, How Does Advertising Depend on Competition? Evidence from U.S. Brewing (July 3, 2017). Rotman School of Management Working Paper No. 2996770, Available at SSRN: https://ssrn.com/abstract=2996770 or http://dx.doi.org/10.2139/ssrn.2996770

Ambarish Chandra

University of Toronto - Rotman School of Management ( email )

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

Matthew Weinberg (Contact Author)

The Ohio State University, Department of Economics ( email )

410 Arps Hall, 1945 N. High St.
3220 Market Street
Columbus, OH 43210
United States

HOME PAGE: http://https://sites.google.com/site/matthewcweinberg/

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