Marketing Papers

Document Type

Technical Report

Date of this Version

4-2013

Publication Source

American Economic Review, The

Volume

103

Issue

2

Start Page

831

Last Page

862

DOI

10.1257/aer.103.2.831

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.

Copyright/Permission Statement

Copyright © 2013 The American Economic Association.

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Date Posted: 15 June 2018

This document has been peer reviewed.