Public Monopoly And Economic Efficiency: Evidence From The Pennsylvania Liquor Control
While private monopolists are generally assumed to maximize profits, the goals of public enterprises are less well known. They estimate a spatial model of demand for liquor that allows calculating counterfactual configurations of stores that maximize profit and welfare. They 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 practice of regulated private entry.