Ellig Wiseman Wine Isnie Presentation 2006

The Economics of Interstate Direct Wine Sipping Jerry Ellig Mercatus Center, George Mason University Alan Wiseman Department of Political Science, Ohio State University

What’s the issue? ,[object Object],[object Object],[object Object],[object Object],[object Object]

Focus of this paper ,[object Object],[object Object],[object Object]

Virginia and Direct Shipment Timeline April 2003 :VA Gov. signs bill to legalize direct shipment. May 2005: Supreme Court rules that discriminatory shipment bans are unconstitutional July 1, 2003 : Direct Shipment to VA is legal. July 2002 : Price and variety data collected from online and bricks and mortar stores in Northern VA March 29, 2002 : Federal Judge finds VA direct shipment law unconstitutional April 1, 2002: Federal Judge puts hold on ruling, pending appeal July-August 2004 : Price and variety data collected from online and bricks and mortar stores in Northern VA

Why Northern VA is a good case study ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Virginia Direct Shipment Permits ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Not everyone can ship to Virginia ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Data ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Transportation Costs ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Cost Comparison Calculations ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Mean Cost Savings (or Extra Expenses) per Bottle When Shopping Online for Entire Sample ,[object Object],[object Object],[object Object],[object Object],-2.17** -0.120 1.601** -2.91** -0.599 1.45** -9.59** -5.17** -1.45* 3.048** 2004 N=63 0.110 Online Savings per Bottle (UPS 2 nd Day Air—12 Bottles) 1.353 Online Savings per Bottle (UPS 3 rd Day Air—12 Bottles) 3.543** Online Savings per Bottle (UPS Ground Service—12 Bottles) -0.767 Online Savings per Bottle (UPS 2 nd Day Air—6 Bottles) 0.707 Online Savings per Bottle (UPS 3 rd Day Air—6 Bottles) 3.342** Online Savings per Bottle (UPS Ground Service—6 Bottles) -7.256** Online Savings (UPS 2 nd Day Air—1 Bottle) -2.443* Online Savings (UPS 3 rd Day Air—1 Bottle) 1.507 Online Savings (UPS Ground Service-Buying 1 Bottle) 5.838** Online Savings (No Transportation Costs) 2002 N=67 Category

Mean Cost Savings (or Extra Expenses) per Bottle When “Comparison Shopping” for Entire Sample ,[object Object],[object Object],1.203** 2.477** Online Savings per Bottle (UPS 2 nd Day Air—12 Bottles) 1.871** 3.020** Online Savings per Bottle (UPS 3 rd Day Air—12 Bottles) 2.671** 4.303** Online Savings per Bottle (UPS Ground Service—12 Bottles) 1.007** 2.276* Online Savings per Bottle (UPS 2 nd Day Air—6 Bottles) 1.737** 2.752** Online Savings per Bottle (UPS 3 rd Day Air—6 Bottles) 2.635** 4.201** Online Savings per Bottle (UPS Ground Service—6 Bottles) 0.413 1.629 Online Savings (UPS 2 nd Day Air—1 Bottle) 1.991** 1.991** 3.720** 2004 N=63 2.207* Online Savings (UPS 3 rd Day Air—1 Bottle) 3.569** Online Savings (UPS Ground Service-Buying 1 Bottle) 5.974** Online Savings (No Transportation Costs) 2002 N=67 Category

Mean Cost Savings (or Extra Expenses) per Bottle When Shopping Online for wines ≥$20/bottle 0.698 2.786** 4.482** 0.034 2.372* 4.403** -5.909** -1.481 2.251 5.884** 2004 N=27 3.654 Online Savings per Bottle (UPS 2 nd Day Air—12 Bottles) 5.005** Online Savings per Bottle (UPS 3 rd Day Air—12 Bottles) 7.194** Online Savings per Bottle (UPS Ground Service—12 Bottles) 2.912 Online Savings per Bottle (UPS 2 nd Day Air—6 Bottles) 4.396* Online Savings per Bottle (UPS 3 rd Day Air—6 Bottles) 7.027** Online Savings per Bottle (UPS Ground Service—6 Bottles) -3.693 Online Savings (UPS 2 nd Day Air—1 Bottle) 1.526 Online Savings (UPS 3 rd Day Air—1 Bottle) 5.512** Online Savings (UPS Ground Service-Buying 1 Bottle) 9.435** Online Savings (No Transportation Costs) 2002 N=36 Category

Mean Cost Savings (or Extra Expenses) per Bottle When Shopping Online for wines <$20/bottle -4.32** -2.299** -0.56 -5.12** -2.83** -0.76*** -12.35** -7.94** -4.23** 0.921** 2004 N=27 -4.22** Online Savings per Bottle (UPS 2 nd Day Air—12 Bottles) -2.89** Online Savings per Bottle (UPS 3 rd Day Air—12 Bottles) -0.697 Online Savings per Bottle (UPS Ground Service—12 Bottles) -5.04** Online Savings per Bottle (UPS 2 nd Day Air—6 Bottles) -3.58** Online Savings per Bottle (UPS 3 rd Day Air—6 Bottles) -0.93** Online Savings per Bottle (UPS Ground Service—6 Bottles) -11.4** Online Savings (UPS 2 nd Day Air—1 Bottle) -7.05** Online Savings (UPS 3 rd Day Air—1 Bottle) -3.14** Online Savings (UPS Ground Service-Buying 1 Bottle) 1.661* Online Savings (No Transportation Costs) 2002 N=36 Category

Why haven’t prices fully converged? ,[object Object],[object Object],[object Object],[object Object],[object Object]

Conclusions ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Ellig Wiseman Wine Isnie Presentation 2006

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Ellig Wiseman Wine Isnie Presentation 2006