Job Market Paper

Quality or Vanity? A Look at Craft Beer

While large “macro” breweries have historically dominated the US beer industry, the industry has seen a significant rise in smaller “craft” breweries. Two possible sources of consumer preferences leading to the growth of craft breweries beer have been forwarded. The first, quality, suggests that craft beers are simply better. The second, what I term vanity, suggests that the non-macro image and branding increase consumer utility. The goal of this paper is to disentangle empirically these two sources of growth. Data on beer sales, prices, and beer brand characteristics from six U.S. cities is combined with brewery ownership data and a quality measure of beer derived from a popular beer rating site. One cannot measure consumer preference for craft beer directly. A negative coefficient on craft branding shows up in past analyses because, by definition, craft beer has a substantially smaller market share than macro beer. To capture craft beers vanity effect, I exploit the fact that within the dataset some macro breweries produce craft beers. This allows me to compare beers with similar market shares. Splitting up craft beer into true craft and macro craft, I find consumers prefer the former to the latter, showing a vanity effect of true craft beer. Overall, the vanity of craft breweries, rather than the higher quality beer craft breweries produce, is driving craft beers growth. [PDF]

Working Papers

I'll Have a Pint. How On Premise Beer Sales Affect Microbreweries

In the beer industry, states control their beer regulations. On premise beer sales allow craft breweries to operate an onsite tap room at their brewery. Allowing on premise beer sales gives microbreweries the opportunity to increase their profits and build their brand in a highly concentrated market. Since 1989, 33 states have passed laws to allow on premise beer sales. This paper looks at how on premise beer sales affects the number and production of microbreweries, a type of craft brewery. A difference-in- differences approach is used to measure the affect on premise beer sales has on microbreweries. Allowing on premise beer sales increases the number and production of microbreweries. Passing an on premise beer sales law leads to an immediate increase in the number of microbreweries and an eventual increase in microbrewery production. States who have not passed on premise beer sales will see an average increase of 4 microbreweries and an average increase in production of microbrewed beer by 35% if a state passes an on premise beer sales law. [PDF]

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