Review of Industrial Organization (2005) 26:269–306 © Springer 2005
Beer Advertising and Marketing Update:
Structure, Conduct, and Social Costs
JON P. NELSON
Department of Economics, Pennsylvania State University, 603 Kern Building, University
Park, PA 16802, U.S.A. E-mail: firstname.lastname@example.org
Abstract. Beer advertising is a topic that has frequently attracted the attention of indus-
trial organization economists. This update reviews major events, data trends, and research
for each of three issues: (1) the importance of advertising and product differentiation for
structural change in the brewing industry; (2) the manner and extent to which brewers
can strategically alter market shares using advertising; and (3) the social costs of beer
advertising and marketing, including advertising bans, targeting of underage youth, and
recent changes in the three-tier system of alcohol distribution. Major legal decisions per-
taining to commercial speech and other regulations also are discussed.
Key words: advertising, brewing industry, regulation.
JEL Classiﬁcations: L66, L13, M37.
Advertising of beer is a topic that has frequently attracted the attention
of industrial organization economists. Several interrelated issues have been
analyzed, including: (1) the importance of advertising and product differ-
entiation for structural change in the brewing industry; (2) the manner
and extent to which brewers can strategically alter market shares using
advertising; and (3) the social costs of alcohol advertising and market-
ing. Seminal research on the ﬁrst issue was performed by Elzinga (1971,
1973), Greer (1971, 1981), Keithahn (1978), Lynk (1984, 1985) and Scherer
et al. (1975). Seminal research on the second issue was performed by
Baker and Bresnahan (1985), Grabowski (1977), Hattan et al. (1978), Kel-
ton and Kelton (1982), and Tremblay (1985a,b). Analyses of both issues
include attempts to determine the net welfare effects of beer advertising.
On the third issue, economists have analyzed advertising’s possible inﬂuence
on alcohol consumption and underage drinking, and as a contributor to
social costs such as drunk driving fatalities (Nelson, 1999, 2001). Several
regulatory concerns are related to this issue, including use of advertising