Market Structure and Product Assortment: Evidence from a Natural Experiment in Liquor Licensure / Gastón Illanes, Sarah Moshary.

Format:

Book

Author/Creator:

Illanes, Gastón.

Contributor:

National Bureau of Economic Research.

Moshary, Sarah.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27016.

NBER working paper series no. w27016

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

We examine how market structure, measured as the number of firms, affects prices, quantities, product assortment, and consumer surplus. Our analysis exploits Washington's deregulation of spirit sales, which generated exogenous variation in market structure across the state. Consistent with the uniform pricing literature, we find no effect of increased competition on prices. Rather, we document an expansion of product assortment, which in turn increases purchasing. Using a discrete-choice demand model, we estimate that wider assortments increase consumer surplus by $3.20/month when moving from monopoly to duopoly. However, the likelihood that a household engages in heavy drinking, as defined by the CDC, increases by 5.6 percentage points, raising concerns about social welfare.

Notes:

Print version record

April 2020.