Dynamic gains and static losses in oligopoly: Evidence from the beer industry

The paper provides a new perspective on the estimate of the welfare losses due to oligopoly. I argue that the conventional analysis of monopoly/oligop oly welfare losses can be misleading. If causation runs from investment in new technology to increased concentration, dynamic gains from innovation sh ould be taken into account for a fuller analysis of welfare losses. I use b eer-industry, data to demonstrate that technological changes Granger-cause beer prices, and beer prices Granger-cause the Herfindahl index. I then est imate the dynamic gains to consumers in the beer industry and find these ga ins to be impressive relative to conventional static losses. (JEL L10, L13) .