At least that is the conclusion that Katja Seim and Joel Waldfogel arrive at in their recent
Public Monopoly and Economic Efficiency: Evidence from the Pennsylvania Liquor Control Board’s Entry Decisions
Katja Seim and Joel Waldfogel
They study the liquor control board in Pennsylvania, which is a monopoly provider of wine and spirits in that state. They conclude that a profit maximizing monopolist would have far fewer state stores than does the Pennsylvania authority–so maybe wine lovers don’t have as far to go as they might have otherwise had. At the same time, instead of locating adjacent to each other, as would occur in the usual world of unregulated free entry, state stores offer convenience to some far-flung locations that would not otherwise be served.
Still, the paper touches only on the aspects of monopoly that affect store locations–and I am betting that most Pennsylvania wine lovers have far bigger concerns than how far they have to drive to buy a bottle of chardonnay. What a lot of them would like to know is why do they have to drive at all? Wine lovers could shop online and have UPS do the driving, in which case store locations would be irrelevant! Shipping wine into Pennsylvania is, of course, illegal.
Moreover, since the Supreme Court compelled states to treat wineries in and out of state similarly, the Pennsylvania monopoly has gone a step farther–it now prohibits intra-state shipping from local, Pennsylvania producers too! Talk about shooting yourself in the foot.
This article was written by Karl Storchmann