Exclusive Territories and Efficiency: Evidence From the Brewing Industry
45 Pages Posted: 9 Jun 2019
Date Written: April 22, 2019
Theories conflict as to whether vertically imposed exclusive territories have a positive or negative impact on welfare, and appropriate antitrust treatment is still debated. I examine the impact that the use of exclusive wholesale territories has in the brewing industry by studying beer sales in Indiana which banned the use of exclusive wholesale territories from 1979-2002. After the repeal of the ban, brewers specified exclusive wholesale territories in contracts. Estimates show that beer sales increased significantly and prices increased modestly. Results are consistent with higher levels of product investments downstream and efficiency-based theories of exclusive territories.
Keywords: vertical relations, exclusive territories, regulation, brewing industry
JEL Classification: L42, L51, L66
Suggested Citation: Suggested Citation