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Didier Tatoutchoup and Octave Keutiben
''Liberalization of the market for alcohol: Evidence from a Canadian province''
( 2020, Vol. 40 No.1 )
We estimate demand and cost functions to determine the optimal policy to regulate the alcohol industry. Interestingly, we show that marginal and average costs may not be constant, as generally assumed in the literature on alcohol industry. A key policy implication from our estimates is that state monopoly is not necessarily the only means, let alone the best, both for maximizing revenue and reducing the social costs of alcohol consumption. Indeed, optimal taxation in a liberalized competitive market can yield a higher net social benefit. We also provide additional elasticities information on alcohol products.
Keywords: State monopoly, liberalization, optimal taxation, alcohol sales
JEL: D4 - Market Structure and Pricing: General
H2 - Taxation, Subsidies, and Revenue: General
Manuscript Received : Dec 09 2019 Manuscript Accepted : Mar 25 2020

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