Consumption and price effects of state‐run liquor monopolies

Abstract

AbstractUniform pricing policies practiced by state monopoly liquor systems are not consistent with a stated objective of revenue‐maximization from liquor sales. If some residents in a monopoly state buy alcoholic beverages in neighboring, lower‐priced states, the monopoly state could increase revenues by lowering prices in the appropriate border counties. The empirical analysis looks at Ohio and finds that residents tend to purchase fewer and less expensive bottles of liquor in state‐run stores which border states with lower liquor prices. The result is several million dollars a year of lost revenue to Ohio.