Affiliation:
1. Department of Business Economics and Public Policy, University of Pennsylvania, 3620 Locust Walk, Philadelphia, PA 19104.
2. Carlson School of Management, University of Minnesota, 321 19th Avenue South, Minneapolis, MN 55455.
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)
Publisher
American Economic Association
Subject
Economics and Econometrics
Cited by
50 articles.
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