How much do consumers care about New and Discontinued products? A Case Study of the MillerCoors Merger

Abstract

This paper finds evidence of product variety changes due to a merger and compares the welfare effects of product variety changes would be in relation to the welfare effects of price changes in the context of the MillerCoors merger of 2008. We first test if the merger had any effect on product variety directly. We find the merged firm decreased the number of brands they offered and offset this by increasing product variety in more successful brands. However, under a difference-and-differences framework we find product variety declined relative to other top competitors. We then use a random coefficient nested logit model and estimate demand for the MillerCoors merger in the post-merger period, expanding on work from Miller and Weinberg (2017). In a set of two counterfactuals, we test the value of new products created after the merger and the value of discontinued products lost after the merger. We find the merger increased consumer surplus from changes in product variety - consumer surplus increases by 1.25% from new products created after the merger and decreases by 0.14% from losing discontinued products after the merger. Benchmarking this to the literature, the effect of new product addition and discontinued product removal is approximately 34% and -4% of the consumer welfare effects of coordinated pricing found in prior work, respectively.

Daniel Perez

Economics Ph.D. Student

My research interests include antitrust enforcement, merger analyses and the effects of product variety on consumer surplus.