Alcohol, antitrust, and the 21st Amendment: An empirical examination of post and hold laws
AbstractThe 21st Amendment repealed prohibition, but granted the states broad power to regulate the distribution and sale of alcohol to consumers within their borders. Pursuant to this authority, states have established a complex web of regulations that limit the ability of beer, wine, and liquor producers to control the distribution of their product. From a consumer welfare perspective, one of the most potentially harmful state alcohol distribution regulations are “post and hold” laws (“PH laws”). PH laws require that alcohol distributors share future prices with rivals by “posting” them in advance, and then “hold” these prices for a specified period of time. Economic theory would suggest that PH laws reduce unilateral incentives for distributors to reduce prices and may facilitate tacit or explicit collusion, both to the detriment of consumers. Consistent with economic theory, we show that the PH laws reduce consumption by 2–8%. We also test whether, by reducing consumption, PH laws provide offsetting societal benefits in the form of reducing drunk driving accidents and underage drinking. We find no measurable relationship between PH laws and these social harms. These results suggest a socially beneficial role for antitrust challenges to PH laws and similar anticompetitive state regulation. If states wish to reduce the social ills associated with drinking, our results also suggest that directly targeting social harms with zero tolerance laws and lower drunk driving thresholds are superior policy instruments to PH laws.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal International Review of Law and Economics.
Volume (Year): 32 (2012)
Issue (Month): 4 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/irle
Alcohol; Regulation; Post and hold; 21st amendment; Prohibition; Temperance; Preemption; Wine; Beer; Liquor; Antitrust; Collusion; Price-fixing; Sherman Act; Three-tier system; Franchise; State action; Federalism; Drunk driving; Alcoholism;
Find related papers by JEL classification:
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chatterji, Pinka & Dave, Daval & Kaestner, Robert & Markowitz, Sara, 2004. "Alcohol abuse and suicide attempts among youth," Economics & Human Biology, Elsevier, vol. 2(2), pages 159-180, June.
- Sass, Tim R & Saurman, David S, 1996.
"Efficiency Effects of Exclusive Territories: Evidence from the Indiana Beer Market,"
Western Economic Association International, vol. 34(3), pages 597-615, July.
- Sass, T. & Saurman, D.S., 1993. "Efficiency Effects of Exclusive Territories: Evidence from the Indiana Beer Market," Working Papers 1993_09_03, Department of Economics, Florida State University.
- Sara Markowitz, 1999.
"The Price of Alcohol, Wife Abuse, and Husband Abuse,"
NBER Working Papers
6916, National Bureau of Economic Research, Inc.
- Sara Markowitz, 2000. "The Price of Alcohol, Wife Abuse, and Husband Abuse," Southern Economic Journal, Southern Economic Association, vol. 67(2), pages 279-303, July.
- Gallet, Craig A., 2007.
"The demand for alcohol: a meta-analysis of elasticities,"
Australian Journal of Agricultural and Resource Economics,
Australian Agricultural and Resource Economics Society, vol. 51(2), June.
- Craig A. Gallet, 2007. "The demand for alcohol: a meta-analysis of elasticities," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(2), pages 121-135, 06.
- Fuller, Stephen W. & Ruppel, Fred J. & Bessler, David A., 1990. "Effect Of Contract Disclosure On Price: Railroad Grain Contracting In The Plains," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 15(02), December.
- Sass, Tim R., 2005. "The competitive effects of exclusive dealing: Evidence from the U.S. beer industry," International Journal of Industrial Organization, Elsevier, vol. 23(3-4), pages 203-225, April.
- Xavier Vives, 2002. "Private Information, Strategic Behavior, and Efficiency in Cournot Markets," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 361-376, Autumn.
- Edward J Green & Robert H Porter, 1997.
"Noncooperative Collusion Under Imperfect Price Information,"
Levine's Working Paper Archive
1147, David K. Levine.
- Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
- Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
- Carpenter Christopher S & Kloska Deborah D & O'Malley Patrick & Johnston Lloyd, 2007. "Alcohol Control Policies and Youth Alcohol Consumption: Evidence from 28 Years of Monitoring the Future," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-23, May.
- Maura P. Doyle & Christopher M. Snyder, 1999.
"Information Sharing and Competition in the Motor Vehicle Industry,"
Journal of Political Economy,
University of Chicago Press, vol. 107(6), pages 1326-1364, December.
- Maura P. Doyle & Christopher M. Snyder, 1997. "Information sharing and competition in the motor vehicle industry," Finance and Economics Discussion Series 1997-4, Board of Governors of the Federal Reserve System (U.S.).
- Daniel Eisenberg, 2003. "Evaluating the effectiveness of policies related to drunk driving," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 22(2), pages 249-274.
- Svend Albæk & Peter Møllgaard & Per Baltzer Overgaard, 1997.
"Government-Assisted Oligopoly Coordination? A Concrete Case,"
CIE Discussion Papers
1997-03, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- Albaek, Svend & Mollgaard, Peter & Overgaard, Per B, 1997. "Government-Assisted Oligopoly Coordination? A Concrete Case," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 429-43, December.
- Chesson, Harrell & Harrison, Paul & Kassler, William J, 2000. "Sex Under the Influence: The Effect of Alcohol Policy on Sexually Transmitted Disease Rates in the United States," Journal of Law and Economics, University of Chicago Press, vol. 43(1), pages 215-38, April.
- Thomas S Dee, 2001. "Does setting limits save lives? The case of 0.08 BAC laws," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 20(1), pages 111-128.
- Sass, Tim R & Saurman, David S, 1993. "Mandated Exclusive Territories and Economic Efficiency: An Empirical Analysis of the Malt-Beverage Industry," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 153-77, April.
- Slade, Margaret E, 1998. "Beer and the Tie: Did Divestiture of Brewer-Owned Public Houses Lead to Higher Beer Prices?," Economic Journal, Royal Economic Society, vol. 108(448), pages 565-602, May.
- Saroja Selvanathan & Eliyathamby Selvanathan, 2007. "Another look at the identical tastes hypothesis on the analysis of cross-country alcohol data," Empirical Economics, Springer, vol. 32(1), pages 185-215, April.
- Christensen, Laurits Rolf & Caves, Richard E, 1997. "Cheap Talk and Investment Rivalry in the Pulp and Paper Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 45(1), pages 47-73, March.
- Christopher Carpenter, 2004. "Heavy alcohol use and youth suicide: Evidence from tougher drunk driving laws," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(4), pages 831-842.
- Steven D. Levitt & Jack Porter, 2001. "How Dangerous Are Drinking Drivers?," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1198-1237, December.
- Douglas Coate & Michael Grossman, 1986.
"Effects of Alcoholic Beverage Prices and Legal Drinking Ages on Youth Alcohol Use,"
NBER Working Papers
1852, National Bureau of Economic Research, Inc.
- Coate, Douglas & Grossman, Michael, 1988. "Effects of Alcoholic Beverage Prices and Legal Drinking Ages on Youth Alcohol Use," Journal of Law and Economics, University of Chicago Press, vol. 31(1), pages 145-71, April.
- Sara Markowitz & Michael Grossman, 1998. "Alcohol Regulation And Domestic Violence Towards Children," Contemporary Economic Policy, Western Economic Association International, vol. 16(3), pages 309-320, 07.
- Kenkel, Donald S, 1993. "Drinking, Driving, and Deterrence: The Effectiveness and Social Costs of Alternative Policies," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 877-913, October.
- Markowitz, Sara, 2005. "Alcohol, Drugs and Violent Crime," International Review of Law and Economics, Elsevier, vol. 25(1), pages 20-44, March.
- Ornstein, Stanley I & Hanssens, Dominique M, 1985. " Alcohol Control Laws and the Consumption of Distilled Spirits and Beer," Journal of Consumer Research, University of Chicago Press, vol. 12(2), pages 200-213, September.
- W. Kip Viscusi & Joseph E. Harrington & John M. Vernon, 2005. "Economics of Regulation and Antitrust, 4th Edition," MIT Press Books, The MIT Press, edition 4, volume 1, number 026222075x, December.
- Christopher S. Carpenter, 2005. "Heavy Alcohol Use and the Commission of Nuisance Crime: Evidence from Underage Drunk Driving Laws," American Economic Review, American Economic Association, vol. 95(2), pages 267-272, May.
- Jon Nelson, 2003. "Advertising Bans, Monopoly, and Alcohol Demand: Testing for Substitution Effects using State Panel Data," Review of Industrial Organization, Springer, vol. 22(1), pages 1-25, February.
- Henry Saffer & Michael Grossman, 1986. "Beer Taxes, the Legal Drinking Age, and Youth Motor Vehicle Fatalities," NBER Working Papers 1914, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.