Spatial Competition and Cross-Border Shopping: Evidence from State Lotteries
- (pp. 199-229)
Abstract
This paper investigates competition between jurisdictions in the context of cross-border shopping for state lottery tickets. Our theoretical model, in which consumers consider both travel costs and lottery payoffs, predicts that per-resident sales should be more responsive to prices in small states with densely populated borders. Using weekly sales data from US lotteries and drawing identification from the rollover feature of jackpots, we estimate this responsiveness and find large effects that vary significantly across states. Using these estimates, we show that competitive pressures from neighboring states may lead to substantially lower optimal prices. (JEL H27, H71, H73, R51)Citation
Knight, Brian, and Nathan Schiff. 2012. "Spatial Competition and Cross-Border Shopping: Evidence from State Lotteries." American Economic Journal: Economic Policy, 4 (4): 199-229. DOI: 10.1257/pol.4.4.199Additional Materials
JEL Classification
- H27 Taxation, Subsidies, and Revenues: Other Sources of Revenue
- H71 State and Local Taxation, Subsidies, and Revenue
- H73 State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
- R51 Finance in Urban and Rural Economies
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