The Economics of Direct Wine Shipping
![handle is hein.journals/jecoplcy3 and id is 259 raw text is: 2007]
THE ECONOMICS OF DIRECT WINE SHIPPING
Jerry Ellig & Alan E. Wiseman-
ABSTRACT
The most significant barriers to online wine sales are state laws that
prohibit direct-to-consumer wine shipping. In 2003, Virginia legalized
interstate direct shipment, and this change provided an opportunity to test
whether these laws significantly affect competition. Previous analyses
found that Virginia's direct shipment ban deprived consumers of greater
variety and lower prices available online; legalization reduced the spread
between online prices and prices at brick-and-mortar retailers in Northern
Virginia. This article compares online and offline prices from 2002 and
2004 that include shipping and transportation costs. We find that after ac-
counting for these costs, the online-offline price difference fell but did not
disappear. On average, substantial price savings were still available online
for the more expensive wines, which constitute almost half the sample. It is
unclear whether the remaining price difference reflects a lag in adjustment
to the change in law, legitimate competitive advantages of brick-and-mortar
wine shops, or aspects of Virginia's law that make online competition less
robust than it could be.
INTRODUCTION
The most significant barriers to online wine sales are state laws that
prohibit direct-to-consumer wine shipping.' Granholm v. Heald established
that states cannot ban interstate direct wine shipping if they permit intra-
state direct wine shipping. Since the decision was announced in June 2005,
many States have liberalized their wine shipping laws, and debate is ongo-
ing in other state capitols. As of May 2006, interstate direct wine shipping
was prohibited in eighteen states, permitted on a limited basis in twenty-one
* Senior research fellow, Mercatus Center, George Mason University, Arlington, Virginia, and
adjunct professor, George Mason University School of Law.
** Assistant professor of political science, Ohio State University, Columbus, Ohio. The authors
would like to thank Van Brantner, Sarah Harkavy, Roman Ivanchenko, Kathryn Kelly, Marco Malim-
ban, Johnny Shoaf, James N. Taylor, and Young Eun Yoo for valuable research assistance.
1 POSSIBLE ANTICOMPETITIVE BARRIERS TO E-COMMERCE: WINE, A REPORT FROM THE STAFF
OF THE FEDERAL TRADE COMMISSION 3 (2003). In the interest of full disclosure, we should note that
we were two of the coauthors of the FTC staff report.](ViewImageLocal?handle=hein.journals/jecoplcy3&div=18&collection=&method=preview&ext=.png&size=3)
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The Economics of Direct Wine Shipping
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