This IEI Insight is provided by Luke Buffington, a Gail Werner-Robertson Fellow and author of forthcoming papers on Nebraska liquor regulations and public choice challenges in education policy.
Following the end of prohibition in 1933 every state instituted some form of what has come to be known as the three-tier system for alcohol distribution. The system requires that all alcohol must go through a state-licensed, independent, third party distributor between the producer and the retail location. This has been combined with franchise laws, which give distributors in many states — including Nebraska — exclusive local contracts with producers that are very difficult to terminate. This legal regime certainly has some benefits, but it also has economic costs.