Trouble Brewing? Impact of Mandated Vertical Restraints on Craft Brewery Entry and Production

39 Pages Posted: 9 Jun 2019

See all articles by Jacob Burgdorf

Jacob Burgdorf

affiliation not provided to SSRN

Date Written: September 18, 2018

Abstract

This paper empirically estimates how U.S. craft brewers’ entry and production decisions responded to mandated vertical restraints. I examine beer franchise laws and their interaction with restrictions on vertical integration between manufacturing and wholesaling. The effects are identified by exploiting variation in policies across states and time between 1980 and 2016. I find that beer franchise laws significantly reduced craft brewery entry and growth. The effects are largest in states that place restrictions on brewery/wholesaler integration. The findings in this paper indicate that the mandated vertical restraints, which were legislated to protect wholesalers from opportunism from brewers with large market power, had the effect of encouraging opportunism from wholesalers and inhibited the growth of smaller firms in the industry.

Keywords: brewing industry, franchise laws, vertical integration

JEL Classification: L42, L51

Suggested Citation

Burgdorf, Jacob, Trouble Brewing? Impact of Mandated Vertical Restraints on Craft Brewery Entry and Production (September 18, 2018). Available at SSRN: https://ssrn.com/abstract=3392392 or http://dx.doi.org/10.2139/ssrn.3392392

Jacob Burgdorf (Contact Author)

affiliation not provided to SSRN

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