Market Power and Joint Dominance in U.K. Brewing

Abstract

Market power and joint dominance are examined in U.K. brewing. I assess unilateral and coordinated effects, where the latter is equated with joint dominance, and show how one can distinguish between the two econometrically. The application makes use of two demand equations: the nested logit of McFadden [1978a] and the distance‐metric of Pinkse, Slade, and Brett [2002] . The two equations yield very different predictions concerning elasticities and markups. Nevertheless, although there is evidence of market power using either demand model, that power is due entirely to unilateral effects. In other words, neither model uncovers evidence of coordinated effects (tacit collusion).

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