Double marginalization and privatization in liquor retailing

The purpose of this paper is to examine the price and store count predictio ns of the spatial and non-spatial models of vertical integration between an upstream monopolist and a downstream monopolistically competitive retail i ndustry using data from Alberta's recently privatized liquor retailing indu stry. This industry, which had been a government owned monopoly, became mon opolistically competitive under privatization. The models predict that vert ical disintegration will lead to higher retail prices and an increase in th e store count in markets that can support multiple stores. Both predictions are supported by liquor store count and price data.