chapter  4
Cigarettes: Old Firms Facing New Challenges
ByFrank J. Chaloupka
Pages 39

The Schlitz Brewing Company produced more beer from the 1940s through the early 1970s than any other company except Anheuser-Busch; however, by 1980 they were a minor brewer on the national scene. There are two ways in which Schlitz's market share erodes as a result of entry by Miller. First is not a result of dynamic interaction and is a well-known result of static Hotelling models. Second reason for Schlitz to lose market share is a result of the dynamics: It takes advantage of high market share today to take short-term profits by reducing its costs at the expense of tomorrow's demand. The other breweries settled the cases quickly, but Schlitz chose to take its case to court and suffered bad publicity as a result. In 1976, new Food and Drug Administration (FDA) regulations regarding which ingredients needed to be printed on the bottles prompted Schlitz to change the preservatives it used.