You fail to explain why prices in Washington went up. The legislature added 27% in new fees to the already highest liquor taxes in the country. Nor did you mention that their High Beer Tax went down 291%. Privatization did not cause prices to go up. In fact, there are some stores that 3 years later are still at or below the old state store prices, that is what free market competition can do.
As for selection here is a 2012 Washington State Price list (http://liq.wa.gov/publications/liqpurchasing/Price%20Book/MAY%202012%20PRICE%20LIST.pdf) it has about 50 varieties of bourbon and about 70 varieties of Scotch listed. Here is the selection from one of the 10 Total Wine & More stores in Washington (http://www.totalwine.com/eng/categories/spirits) They have 289 varieties of bourbon and 381 varieties of Scotch. There are well over 30 such superstores in Washington, each with more selection in one store than what was available in the entire state.
You are just wrong, selection "did not start to erode" it has increased dramatically.
The PLCB has an effective markup of 45.2% and that is going up a bit from the newly imposed fees passed this month. The wholesale tax is 15% which alone will bring in more revenue than the current state store system does. That leaves the question if a private business can work within the remaining 30.2% of margin without raising prices. For higher volume stores that is certainly possible, for lower volume stores perhaps not. It is not the governments job to control retail prices to make sure everything everywhere costs the same any more than it is their job to make sure you have equal access to French cheese.
If you need verification of ANYTHING in this post I can provide it - I deal in facts not generalized statements.
Free enterprise works. Just look at everything else you buy.