Brewing Wars of Attrition for Profit (and Concentration)

Although research on industry structure, conduct, and performance has been important there are concerns that empirical applications inappropriately pool data from different industries and ignore the contributions of game theory. We avoid these concerns by investigating a single industry, U.S. brewing, in a simultaneous system derived from a game theoretic model. In spite of rising concentration in brewing, profits remained low because of a continuing war of attrition. We develop a measure of the likelihood of “war” and find that the type of game being played, as well as structure and conduct variables, is an important determinant of industry performance.