The End of Prohibition and Alcohol-Firm Stock Prices

Working title

An asset-pricing and industrial-organization study of how repeal of Prohibition reshaped the value of incumbent alcohol firms that had enjoyed a state-enforced oligopoly.

Work in progress · with Patricia Hummel and Corey Pendleton

Research question

Under Prohibition, legal alcohol production was centralized and largely medicinal, leaving a small set of incumbent producers operating as a state-enforced oligopoly. This project asks an asset-pricing question: what happened to those firms’ equity value once investors became confident that Prohibition was ending — and that repeal would open the market to new entrants and erode their protected profits?

The design pairs an event study around the repeal signal (the moment the historically driest states moved to ratify) with an industrial-organization extension built from newspaper evidence on market entry and enforcement, testing whether incumbent values fell further as new entrants appeared.

Note

This project is in early development (data collection underway). Details available on request.