958 CYNTHIA A MONTGOMERY AND BIRGER WERNERFELT TABLE 2 Estimated Values of gamma Firm Gamma mple period Anheuser-Busch 280 19.2 0.41 Coors Heileman 0.718 (1974-79) 0. 174, which is significantly different from zero beyond the 1 percent level. Thus we estimate that industry effects account for 15 to 20 percent of the variance in returns-a result very consistent with the cross-sectional literature (Schmalensee 1985; Wernerfelt and Montgomery 1988) Given that we found excessive market share competition it is logical to attribute part of the industry effect to mutual value destruction in price and advertising wars,rather than to collusion 5. Discussion We have performed a partial decomposition of the sources of value creation in the U.S. brewing industry between 1969 and 1979. The analysis suggests that(a)on the average, gains in market share were associated with the destruction rather than the creation, of firm value, and (b)a portion of the industry component of returns came from excessive competition, rather than collusion This picture of the industry is quite consistent with that painted by earlier work and answers questions posed by it. Schendel and Patton (1978)argued that the majors engaged in advertising wars to gain market share with presumed later benefits. Since they used yearly accounting returns, they were not able to pursue the topic in further depth. Similarly, Lynk(1984)argues that competition, rather than collusion, characterized the industry. His data did not allow him to evaluate whether the competition was"excessive only that it dominated collusion A final clarification: it is not our view that competition for market share should be avoided. It is only overzealous attempts to gain share that are problem. Neither is it our view that all, or even most, industry effects result from excessive competition. We merely claim that it is unlikely that collusion tells the whole story. /e are grateful for comments by participants at various seminars, Robert Keeley, the Associate Editor, and an anonymous referee. The usual disclaimer applies References ADMATL. A. F AND S A. Ross ing Investment Performance in a Rational Expectations equilibrium Model. "J. Business. 58 6 BAIN. J S."Relation of Profit R dustry Concentration: American Manufacturing, 1936-1940, " Quart J. Economics, 65(1951) banz, R, "The Relationship Between Return and Market value of Common Stocks, J. Financial Economics 9(1981),3-18 BENSTON, G.J., " The Validity of Profits-Structure Studies with Particular Reference to the FTC's Line of Business Data, Amer. Economic Rev., 75(1985), 37-67 BLUME, M. E. AND R. F STAMBAUGH, ""Biases in Computed Returns: An Application to the Size Effect J. Financial Economics, 12(1983), 387-409 BROWN, S.J. AND M. J WEINSTEIN, "Derived Factors in Event Studies, "J. Financial Economics, 14(1985) 491-495