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How Many Bottles Make a Case Against Prohibition? Online Wine and Virginia's Direct Shipment Ban


Alan E. Wiseman


Vanderbilt University - Department of Political Science

Jerry Ellig


George Mason University - Mercatus Center

March 2003

FTC Bureau of Economics Working Paper No. 258

Abstract:     
This study investigates the effects of the Commonwealth of Virginia's ban on direct wine shipments from out-of-state sellers on wine prices and variety available to consumers in the greater McLean, Virginia area. Our results indicate that Virginia's direct shipment ban reduces the varieties of wine available to consumers and prevents consumers from purchasing some premium wines at lower prices online. Using a sample of 83 wines judged to be "highly popular" in Wine and Spirits magazine's annual restaurant poll, we find that 15 percent of wines available online were not available from retail wine stores within 10 miles of McLean during the month the data were collected. The fact that local wine stores may not carry certain wines may result, in part, from other Virginia regulations that affect the structure of the wholesale market. We also find that the lowest quoted online price offered significant cost savings over the lowest local retail price in our survey for many types of wine during the month the data were collected. The extent of any cost savings depends on the price per bottle, the quantity of wine ordered, and the shipping method chosen. For wines costing $20/bottle or more, online purchase of a 12-bottle case could save, on average, 13 percent if shipped via ground. Average savings of up to 21 percent are available on a 12-bottle case of wines costing more than $40/bottle, and purchasers of these wines can save money regardless of the shipping method. Such savings, however, are not consistent for all types of wine; for bottles costing less than $20, consumers would pay an additional 8-83 percent per bottle online. In addition, some individual wines priced below $40 were less expensive in local retail stores.

Number of Pages in PDF File: 50

Keywords: wine, interstate, e-commerce, Internet, direct shipping, alcohol, 21st Amendment, federalism, franchise, monopoly, competition, retail, wholesale, Virginia, vertical integration, prohibition, temperance

JEL Classification: 6120, 6333, L110, L0330, L220, L510, L810, L8

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Date posted: July 21, 2003  

Suggested Citation

Wiseman, Alan E. and Ellig, Jerry, How Many Bottles Make a Case Against Prohibition? Online Wine and Virginia's Direct Shipment Ban (March 2003). FTC Bureau of Economics Working Paper No. 258. Available at SSRN: http://ssrn.com/abstract=402360 or http://dx.doi.org/10.2139/ssrn.402360

Contact Information

Alan E. Wiseman (Contact Author)
Vanderbilt University - Department of Political Science ( email )
VU Station B #351817
Nashville, TN 37235-1817
United States
Jerry Ellig
George Mason University - Mercatus Center ( email )
3434 Washington Blvd
4th Floor
Arlington, VA 22201-4433
United States
703-375-9410 (Phone)
HOME PAGE: http://mercatus.org/jerry-ellig
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