"An Empirical Model of Firm Entry: New Product Introduction and Brand Proliferation in the Beer Industry" by Vera Holovchenko, Barry J. Seldon, and Victor J. Tremblay
Abstract:
We empirically analyze niche (submarket) entry in a model of the U.S. brewing industry with differentiated products. Cost, strategic choices, and demand conditions motivate firms to diversify and create new brands. The probability of entry is estimated as a function of existing market variables, expectations regarding market size, and rival presence. We estimate reduced-form model parameters for submarket-specific equations to explain entry. Our findings suggest that entry into high-end markets is based on different factors than entry into low-end markets. Moreover, contrary to an entry-prevention perspective, the number of existing brands contributes rather than prevents entry into product niches.