Hostname: page-component-76fb5796d-45l2p Total loading time: 0 Render date: 2024-04-30T04:45:16.369Z Has data issue: false hasContentIssue false
  • English
  • Français

Market and Nonmarket Barriers to Internet Wine Sales: The Case of Virginia

Published online by Cambridge University Press:  20 January 2017

Alan E. Wiseman  and
Jerry Ellig
Alan E. Wiseman
Affiliation:
The Ohio State University
Jerry Ellig
Affiliation:
Mercatus Center at George Mason University
Get access Rights & Permissions [Opens in a new window]

Abstract

We discuss the political and legal environment surrounding Internet wine sales, and consider the arguments in the debate over direct shipment bans on wine by investigating the wine market in the Northern Virginia suburbs of Washington, DC. Using a sample of wines identified by 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, Virginia during the month the data were collected. Our results also indicate that Virginia's direct shipment ban, which was in place until 2003, prevented consumers from purchasing some premium wines at lower prices online. Aggregate cost savings depends on the consumer's shopping strategy, the price per bottle, the quantity of wine ordered, and the shipping method chosen. For the entire sample, online purchase could result in an average savings of as much as 3.6 percent or an average premium of as much as 48 percent. A comparison shopper who considers both online and offline retailers could save an average of 1.6-9.7 percent. These results help explain why consumers and producers have found it worthwhile to challenge interstate direct shipment bans, which tend to benefit wine wholesalers.

Keywords

Electronic CommerceWineState RegulationInterest Group Politics21st Amendment
Type
Research Article
Information
Business and Politics , Volume 6 , Issue 2 , August 2004 , pp. 1 - 34
Copyright
Copyright © V.K. Aggarwal 2004 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bailey, Joseph P. 1998a. “Electronic Commerce: Prices and Consumer Issues for Three Products: Books, Compact Disks, and Software.” Organization for Economic Cooperation and Development, OECD/GD(98)4.Google Scholar
Bailey, Joseph P. 1998b. Intermediation and Electronic Markets: Aggregation and Pricing in Internet Commerce. Ph.D. Thesis, Massachusetts Institute of Technology.Google Scholar
Bakos, Yannis. 1997. “Reducing Buyer Search Costs: Implications for Electronic Marketplaces.” Management Science 43: 12: 1676–92.CrossRefGoogle Scholar
Bakos, Yannis. 2001. “The Emerging Landscape for Retail E-Commerce.” Journal of Economic Perspectives 15: 1 (Winter): 69–80.CrossRefGoogle Scholar
Baron, David P. 1999. Integrated Market and Nonmarket Strategies in Client and Interest Group Politics.” Business and Politics 1 (Arpril): 7–34.CrossRefGoogle Scholar
Baron, David P. 2003. Business and Its Environment, 4th Edition. Upper Saddle River, NJ: Prentice Hall.Google Scholar
Brynjolfsson, Erik, and Smith, Michael. 2000. “Frictionless Commerce? A Comparison of Internet and Conventional Retailers.” Management Science 46 (4): 563–585.CrossRefGoogle Scholar
Culbertson, W. Patton, and Bradford, David. 1991. “The Price of Beer: Some Evidence from Interstate Comparisons.” International Journal of Industrial Organization 9: 2: 275–89.Google Scholar
Federal Trade Commission (FTC). 2002. Public Workshop: Possibly Anticompetitive Efforts to Restrict Competition on the Internet. (Oct. 8 Transcript) at http://www.ftc.gov/opp/ecommerce/anticompetitive/021008antitrans.pdf Google Scholar
Federal Trade Commission (FTC). 2003. Possible Anticompetitive Barriers to E-Commerce: Wine. Report from the Staff of the Federal Trade Commission (July).Google Scholar
Genesen, Tracy. 2002. “Coalition for Free Trade Position Summary.” presented at Federal Trade Commission Workshop on Possible Anti-Competitive Efforts to Restrict Competition on the Internet (October 8).Google Scholar
Gertner, Robert H., and Stillman, Robert S. 2001. “Vertical Integration and Internet Strategies in the Apparel Industry.” Journal of Industrial Economics 49: 4 (December): 417–40.CrossRefGoogle Scholar
Gray, C. Boyden. 2002. “Wine and Spirits Wholesalers of America Summary Position Paper.” presented at Federal Trade Commission Workshop on Possible Anti-Competitive Efforts to Restrict Competition on the Internet (October 8).Google Scholar
Groseclose, Tim and Snyder, James M. 1996. “Buying Supermajorities.” American Political Science Review 90(2): 303–12.CrossRefGoogle Scholar
Gross, Steve. 2002. “Wine Institute Position Summary.” presented at Federal Trade Commission Workshop on Possible Anti-Competitive Efforts to Restrict Competition on the Internet (October 8).Google Scholar
Grossman, Gene M. and Helpman, Elhanan. 1994. “Protection for Sale.” American Economic Review 84 (4): 833–50.Google Scholar
Holt, Debra J. 2003. “The Internet and Auto Sales: Benefits and Barriers.” Journal of Private Enterprise 19 (1): 21–37.Google Scholar
Hurd, William H. 2002. “Remarks of William H. Hurd.” presented at Federal Trade Commission Workshop on Possible Anti-Competitive Efforts to Restrict Competition on the Internet (October 8).Google Scholar
Jordan, W. John, and Jaffee, Bruce L. 1987. “The Use of Exclusive Territories in the Distribution of Beer: Theoretical and Empirical Observations.” Antitrust Bulletin 32: 1 (Spring): 137–64.CrossRefGoogle Scholar
Lee, Ho Geun. 1997. “Do Electronic Marketplaces Lower the Price of Goods?” Communications of the ACM 41 (1): 73–80.CrossRefGoogle Scholar
Levine, Michael E. (1965) “Is Regulation Necessary?: California Air Transportation and National Regulatory Policy.” Yale Law Journal 74 (July): 1416–47.CrossRefGoogle Scholar
Lynch, John G., and Ariely, Dan. 2000. “Wine Online: Search Costs Affect Competition on Price, Quality, and Distribution.” Marketing Science 19: 1 (Winter): 83–103.CrossRefGoogle Scholar
McFadden, Daniel L. 2002. “Interstate Wine Shipments and E-Commerce.” presented at Federal Trade Commission Workshop on Possible Anti-Competitive Efforts to Restrict Competition on the Internet (October 8).Google Scholar
Mead, Irene M. 2002. “State of Michigan's Remarks.” presented at Federal Trade Commission Workshop on Possible Anti-Competitive Efforts to Restrict Competition on the Internet (October 8).Google Scholar
Milyo, Jeffrey, and Waldfogel, Joel. 1999. “The Effect of Price Advertising on Prices: Evidence in the Wake of 44 Liquormart.” American Economic Review 89 (5): 1081–1096.CrossRefGoogle Scholar
Painter, Murphy J. 2002. “Statement of Murphy J. Painter on Behalf of the Joint Committee of the States.” presented at Federal Trade Commission Workshop on Possible Anti-Competitive Efforts to Restrict Competition on the Internet (October 8).Google Scholar
Peltzman, Sam. 1976. “Toward a More General Theory of Regulation.” Journal of Law and Economics 19: 211–40.Google Scholar
Posner, Richard A. 1974. “Theories of Economic Regulation.” Bell Journal of Economics 5 (Autumn): 335–58.Google Scholar
Riekhof, Gina, and Sykuta, Michael. 2003. Politics, Economics, and the Regulation of Direct Interstate Shipping in the Wine Industry. University of Missouri-Columbia, CORI Working Paper No. 2003–04.CrossRefGoogle Scholar
Salop, Steven C., and Stiglitz, Joseph E. 1977. “Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion.” Review of Economic Studies 44 (3): 493–510.CrossRefGoogle Scholar
Sass, Tim R., and Saurman, David S. 1996. “Efficiency Effects of Exclusive Territories: Evidence from the Indiana Beer Market.” Economic Inquiry 34: 3 (July): 597–615.CrossRefGoogle Scholar
Scott Morton, Fiona, Zettelmeyer, Florian and Silva-Risso, Jorge. 2001. “Internet Car Retailing.” Journal of Industrial Economics 49: 4 (December): 501–19.Google Scholar
Sloane, David. 2002. “Summary Statement of the American Vintners Association.” presented at Federal Trade Commission Workshop on Possible Anti-Competitive Efforts to Restrict Competition on the Internet (October 8).Google Scholar
Small, Kenneth A., Winston, Clifford, and Yan, Jia. 2002. Uncovering the Distribution of Motorists’ Preferences for Travel Time and Reliability: Implications for Road Pricing. Unpublished manuscript, University of California, Irvine.Google Scholar
Smith, Michael D., Bailey, Joseph, and Brynjolfsson, Erik. 2000. “Understanding Digital Markets: Review and Assessment.” In Understanding the Digital Economy: Data, Tools, and Research, edited by Brynjolfsson, Erik and Kahin, Brian. Cambridge: MIT Press.Google Scholar
Stigler, George. 1971. “The Theory of Economic Regulation.” Bell Journal of Regulation 2 (Spring). 3–21.Google Scholar
Wiseman, Alan E. 2000. The Internet Economy: Access, Taxes and Market Structure. Washington, DC: Brookings Institution Press Google Scholar
Wiseman, Alan E. and Ellig, Jerry. 2003. How Many Bottles Make a Case Against Prohibition? Online Wine and Virginia's Direct Shipment Ban. Federal Trade Commission, Bureau of Economics Working Paper # 258 (March).Google Scholar
Zettelmeyer, Florian, Scott Morton, Fiona, and Silva-Risso, Jorge. 2001. Cowboys or Cowards? Why are Internet Car Prices Lower? National Bureau of Economic Research Working Paper No. 86CrossRefGoogle Scholar