Public monopoly and economic efficiency: Evidence from the pennsylvania liquor control board's entry decisions

Katja Seim, Joel Waldfogel

Research output: Contribution to journalArticlepeer-review

26 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)831-862
Number of pages32
JournalAmerican Economic Review
Volume103
Issue number2
DOIs
StatePublished - Apr 2013

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