Public Monopoly and Economic Efficiency: Evidence from the Pennsylvania Liquor Control Board's Entry Decisions

Katja Seim and Joel Waldfogel

American Economic Review, 2013, vol. 103, issue 2, 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)

JEL-codes: D42 D72 L11 L12 L43 L81 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/aer.103.2.831
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Citations: View citations in EconPapers (63)

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Working Paper: Public Monopoly and Economic Efficiency: Evidence from the Pennsylvania Liquor Control Board's Entry Decisions (2010)
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