American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Public Monopoly and Economic Efficiency: Evidence from the Pennsylvania Liquor Control Board's Entry Decisions
American Economic Review
vol. 103,
no. 2, April 2013
(pp. 831–62)
Abstract
We estimate a spatial model of liquor demand to analyze the impact of government-controlled retailing on entry patterns. In the absence of the Pennsylvania Liquor Control Board, the state would have roughly 2.5 times the current number of stores, higher consumer surplus, and lower payments to liquor store employees. With just over half the number of stores that would maximize welfare, the government system is instead best rationalized as profit maximization with profit sharing. Government operation mitigates, but does not eliminate, free entry's bias against rural consumers. We find only limited evidence of political influence on entry. (JEL D42, D72, L11, L12, L43, L81)Citation
Seim, Katja, and Joel Waldfogel. 2013. "Public Monopoly and Economic Efficiency: Evidence from the Pennsylvania Liquor Control Board's Entry Decisions." American Economic Review, 103 (2): 831–62. DOI: 10.1257/aer.103.2.831Additional Materials
JEL Classification
- D42 Market Structure and Pricing: Monopoly
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L12 Monopoly; Monopolization Strategies
- L43 Legal Monopolies and Regulation or Deregulation
- L81 Retail and Wholesale Trade; e-Commerce