David S. Saurman

Mandated Exclusive Territories and Economic Efficiency: An Empirical Analysis of the Malt-Beverage Industry

* We thank Bruce Benson, Robert B. Ekelund, Jr., Roger Folsom, Gary Fournier, Micha Gisser, Doug Greer, Barry Hirsch, John Morris, and an anonymous referee for their valuable comments. We are also grateful to Jerry Steinman and Frank Chaloupka for providing some of the data. Alex Hayes, John Keiffer, Mike Lund, Mark Nichols, and Mark Thornton provided able research assistance. The San Jose State University College of Social Sciences provided financial support to Saurman. Any remaining errors are solely our responsibility. Industries in which firms have imposed vertical territorial restraints include audio components, hearing aids, sailboats, soft drinks, and beer. See Thomas R. Overstreet, Resale Price Maintenance: Economic Theories and Empirical Evidence 84-101 (staff report, Federal Trade Commission, Bureau of Economics 1983). For discussions of the territorial restrictions in the hearing aid industry, see Howard P. Marvel, Vertical Restraints in the Hearing Aids Industry, in Impact Evaluations of Federal Trade Commission Vertical Restraints Cases (Ronald N. Lafferty, Robert H. Lande, and John B. Kirkwood eds. 1984). Robert Larner, The Economics of Territorial Restrictions in the Soft Drink Industry, 22 Antitrust Bull. 145 (1977); Barbara G. Katz, Territorial Exclusivity in the Soft Drink Industry, 27 J. Indus. Econ. 85 (1978); and Louis W. Stern, Eugene F. Zelek, and Thomas W. Dunfee, A Rule of Reason Analysis of Territorial Restrictions in the Soft Drink Industry, 27 Antitrust Bull. 481 (1982), analyze the use of exclusive territories in the soft-drink industry. None of these articles include empirical tests, however.

Smoking and absenteeism

Studies of the causes of absence from work tend to indicate uniformly that smokers miss more work than non-smokers. Some estimates of this increased smoker absenteeism range as high as 32%, or about 81 million additional lost days of work per year in the US alone. Unfortunately these studies, in the main, employ only a simple means difference test as a statistical basis for their deductions, and hence are incapable of determining whether smokers miss more work because they smoke or for other reasons common to smokers as a group. In this study, we posit a native model of absenteeism and employ Tobit analysis to estimate its response to various determinants using data from the 1968 PSID. We than empoly a Blinder-type decomposition technique to attempt to determine the amount of absenteeism attributable directly or indirectly to smoking behaviour of workers. Our results suggest that smokers miss no more work than non-smokers because they smoke. Rather smokers tend to be younger, heavier drinkers, blue collar...

Instant winners: Legal change in transition and the diffusion of state lotteries*

This paper investigates the determinants of legal change in a public choice framework. An empirical model explaining the timing and probability of decisions to adopt state-operated lotteries is developed. Employing a Tobit estimator and explicitly considering the effects of state-specific constitutional and political structures, spending and tax policies, and federal revenue importation, evidence is presented showing that legal change is much like economic change: Lotteries are more likely to be adopted and to be adopted earlier where the costs are lowest relative to expected benefits. State legislatures appear to be the main beneficiaries of this public choice process.

Mandated exclusive territories: Efficiency effects and regulatory selection bias

In this paper we analyze the efficiency effects of state-mandated exclusive distribution territories in the U.S. beer industry. Using panel data for 48 states over a 10-year period we estimate both fixed-effects and instrumental-variable models of the impact of mandated exclusive territories on beer consumption. We find that standard OLS regressions of beer consumption suffer from selection bias, due to the endogeneity of state statutes. Correcting for this bias we estimate exclusive territory mandates increase consumption by between three and eleven%. Our results therefore indicate that exclusive territories in the beer industry increase social welfare and enhance the well-being of consumers.