|One Markup to Rule Them All: Taxation by Liquor Pricing Regulation|
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Government often chooses simple rules to regulate industry even when firms and consumers are heterogeneous. We evaluate the implications of this practice in the context of alcohol pricing where the regulator uses a single markup rule that does not vary across products. We estimate an equilibrium model of wholesale pricing and retail demand for horizontally differentiated spirits that allows for heterogeneity in consumer preferences based on observable demographics. We show that the single markup increases market power among upstream firms, particularly small firms whose portfolios are better positioned to take advantage of the policy. For consumers, the single markup acts as a progressive tax by overpricing products favored by the rich. It also decreases aggregate consumer welfare though 1...
Published: Eugenio J. Miravete & Katja Seim & Jeff Thurk, 2020. "One Markup to Rule Them All: Taxation by Liquor Pricing Regulation," American Economic Journal: Microeconomics, vol 12(1), pages 1-41. citation courtesy of
|Economies of Density in E-Commerce: A Study of Amazon’s Fulfillment Center Network|
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We examine the economies of density associated with the expansion of Amazon’s distribution network from 2006 to 2018. We demonstrate that, in placing a fulfillment center in a new state, Amazon faces a trade-off between the revenue implications of exposing local customers to sales tax on their purchases and the cost savings from reducing the shipping distance to those customers. Using detailed data on online transactions, we estimate a model of demand for retail goods and show that consumers’ online shopping is sensitive to sales taxes. We then use the demand estimates and the spatial distribution of consumers relative to Amazon’s fulfillment centers to predict revenues and shipping distances under the observed fulfillment center roll-out and under counterfactual roll-outs over this time p...
|Ownership Concentration and Strategic Supply Reduction|
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We explore the implications of ownership concentration for the recently-concluded incentive auction that re-purposed spectrum from broadcast TV to mobile broadband usage in the U.S. We document significant multi-license ownership of TV stations. We show that in the reverse auction, in which TV stations bid to relinquish their licenses, multi-license owners have an incentive to withhold some TV stations to drive up prices for their remaining TV stations. Using a large-scale valuation exercise, we find that this strategic supply reduction conservatively increases payouts to TV stations by between 7.0% and 20.7%.
|Public Monopoly and Economic Efficiency: Evidence from the Pennsylvania Liquor Control Board's Entry Decisions|
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While private monopolists are generally assumed to maximize profits, the goals of public enterprises are less well known. Using the example of Pennsylvania's state liquor retailing monopoly, we use information on store location choices, prices, wholesale costs, and sales to uncover the goals implicit in its entry decisions. Does it seek to maximize profits or welfare? We estimate a spatial model of demand for liquor that allows us to calculate counterfactual configurations of stores that maximize profit and welfare. We find that welfare maximizing networks have roughly twice as many stores as would maximize profit. Moreover, the actual network is much more similar in size and configuration to the welfare maximizing configuration. An alternative to a state monopoly would be the common ...
Published: Katja Seim & Joel Waldfogel, 2013. "Public Monopoly and Economic Efficiency: Evidence from the Pennsylvania Liquor Control Board's Entry Decisions," American Economic Review, American Economic Association, vol. 103(2), pages 831-62, April. citation courtesy of