Spatial Competition and Cross-Border Shopping: Evidence from State Lotteries

Brian Knight and Nathan Schiff

American Economic Journal: Economic Policy, 2012, vol. 4, issue 4, 199-229

Abstract: This paper investigates competition between jurisdictions in the context of cross-border shopping for state lottery tickets. Our theoretical model, in which consumers consider both travel costs and lottery payoffs, predicts that per-resident sales should be more responsive to prices in small states with densely populated borders. Using weekly sales data from US lotteries and drawing identification from the rollover feature of jackpots, we estimate this responsiveness and find large effects that vary significantly across states. Using these estimates, we show that competitive pressures from neighboring states may lead to substantially lower optimal prices. (JEL H27, H71, H73, R51)

JEL-codes: H27 H71 H73 R51 (search for similar items in EconPapers)
Date: 2012
Note: DOI: 10.1257/pol.4.4.199
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Citations: View citations in EconPapers (11)

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Working Paper: Spatial Competition and Cross-border Shopping: Evidence from State Lotteries (2010)
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