ABSTRACT
This chapter explores the massive structural changes that the beer industry has experienced over the past five decades—their nature and their causes. Economies of scale could help to explain the concentration trend in beer. They may also influence the condition of entry into the industry. By strictly economic standards, the performance of the beer industry is less interesting than its structure and conduct. The economic rationale for allowing territorial exclusives in most instances is fairly clear. The product market is only part of the story. The field of competition among brewers may be further delineated geographically. In the late 1940s, most beer was supplied by small firms that never shipped to more than a few neighboring states. Economies of scale at the firm level, associated with multiplant operations, might arise for beer from several possible sources—peak spreading, lot-size economies, and advertising. The beer industry has experienced immense transformation. Concentration has risen dramatically at all geographic levels.
