The Beer Store, Monopoly Profits and the Potential for Government Revenue: An Economic Analysis
نویسنده
چکیده
In a recent study conducted for the Ontario Convenience Store Association I find evidence of significant average price differences in specific beer products between Ontario and Quebec, which I attribute to the near monopoly status enjoyed by The Beer Store (TBS). Back of the envelope calculations suggest the existence of significant profits enjoyed by TBS. In this paper, I study differences across specific brands. Employing data on 24 bottle (341 ml) packs collected from major Quebec grocery retailers over many weeks, my results suggest median differences ranging from roughly $3-$6, without accounting for variation in province specific commodity taxes. The need to account for commodity taxes is conditional on whether the beer is manufactured in Ontario. Using the conservative approach of applying a commodity tax correction to all products, I find that median estimates of price differences for a majority of domestic brands, reduces to $1.3-$3.3 However, data from Costco reveals large differences for major imported brands, in comparison to corresponding prices posted by TBS. Specifically, median estimates imply differences ranging from roughly $9-$11, after adjusting for deposit fees, sales taxes, and commodity taxes. A weighted average of price differences between domestic and imported brands suggests a 17% in beer prices between the two provinces. In tandem with the likely existence of significant economies of scale, my results indicate that TBS experiences significant retail profits, which under some assumptions, may be even larger than $700 million. The implications for government revenue are obvious. 1 The opinions expressed in this paper do not reflect the opinions of the Department of Economics at the University of Waterloo or the University of Waterloo. I did not accept any funding from the Ontario Convenience Store Association (OCSA) or from any other organization to write this paper. I take exclusive responsibility for all errors.
منابع مشابه
Tax Policy and Economic Growth in the Developing and Developed Nations
Fiscal policy is a policy that tries to achieve certain economic goals through instruments such as changes in government expenditure and taxation. The financial policy uses two instruments of government revenue (tax) and government spending (spending) to influence the economy. And in the economic literature, they consider economic growth to be equal to GDP. The impact of financial policies on e...
متن کاملDoes an Economic and Political Affairs Matter in Determining the Tax Revenue of Jammu and Kashmir State (India): An Approach through VECM Model
T he state of Jammu & Kashmir is one of the special category states of India, that faces a severe resource crunch on the one hand and an explosive public expenditure trend on the other hand. The inability of the state government to raise adequate resources of its own cast’s serious doubt about the tax efforts carried out by the government from time to time. Against this background, t...
متن کاملThe Tax and Petroleum Revenue Effect on Iran’s Public Expenditures (1994–2015), Employing Fiscal Illusion Approach
I ncreased expenditures and the government size is an important issue in public sector economics. In this regard, various theories have been developed in order to justify the reasons for the public expenditure growth, and the theories have been empirically tested. One of the outlooks explaining the government expenditures growth and the economy size, is fiscal illusion approach. According ...
متن کاملEconomic Regulation Design for the Electricity Distribution Companies of Iran
In addition to the necessity of liberalizing the price of the various sectors of electricity, the regulation of sectors that still maintain their own monopoly structure is mandatory. In order to improve the efficiency of these sectors and encourage their cost reduction, incentive-based regulatory approaches are used which rely on performance evaluation. Due to the monopolistic structure of Iran...
متن کاملOil, Government’s Budget and Economic Growth: A Dynamic Panel Data Model for Selected Oil Exporting Economies
Recognition of economic growth determinants is one of the most important concerns for economists. In the oil exporting countries oil revenues play a significant role for the economy alongside with other economic growth determinants. This paper attempts to investigate the role of oil in selected oil-revenue dependent economies. Since oil revenue goes directly to public treasury and is expended b...
متن کامل