Evaluating Coordinated E¤ects: An application to the US beer industry

The paper brings Friedman?s (1971) collusive game to data and investigates whether the merger between the ?fth and fourth largest brewer (G. Heileman and Stroh) of the US beer industry in the mid 1990?s had a signi?cant impact on the incentives to collude in the industry. It does so by ?rstly estimating a random coe¢ cient Logit demand system for the US beer market. In a second step the demand estimates are used to conduct a merger simulation (Davis, 2006) quantifying coordinated e¤ects of the merger. The results show that the change in the likelihood of collusion for the non merging parties was negligible, but signi?cantly increased for the merged party.