Thursday, February 19, 2015
Daniel Toro-Gonzalez (Universidad Tecnologica de Bolivar), Jill J. McCluskey (Washington State) and Ron C. Mittelhammer (Washington State) explain that Beer Snobs do Exist: Estimation of Beer Demand by Type.
ABSTRACT: Although mass-produced beers still represent the vast majority of U.S. beer sales, there has been a significant growth trend in the craft beer segment. This study analyzes the demand for beer as a differentiated product and estimates own-price, cross-price and income elasticities for beer by type: craft beer, mass-produced beer, and imported beer. We verify that beer is a normal good with a considerably inelastic demand and also find that the cross price elasticity across types of beer is close to zero. The results suggest that there are effectively separate markets for beer by type.