Abstract
Recent game-theoretic models of cartel behavior assess the sustainability of cooperation in the presence of demand fluctuations. Depending on the stochastic assumptions of demand, different outcomes are predicted. Accordingly, this paper investigates the effects of demand fluctuations on competition in the U.S. brewing industry. The results show that competition among brewers is greater during periods associated with significant negative shocks to demand, lower observed demand, lower expected future industry profit, and lower advertising.