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Rational Addiction Evidence From Carbonated Soft Drinks

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  • Xiaoou, Liu
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    Abstract

    This paper applies the Becker-Murphy (1988) theory of rational addiction to the case of carbonated soft drinks, using a time-varying parameter model and scanner data from 46 U.S. cities. Empirical results provide strong evidence that carbonated soft drinks are rationally addictive, thus opening the door to taxation and regulation. Taking rational addition into account, estimated demand elasticities are much lower than previous estimates using scanner data.

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    File URL: http://purl.umn.edu/51620
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    Bibliographic Info

    Paper provided by International Association of Agricultural Economists in its series 2009 Conference, August 16-22, 2009, Beijing, China with number 51620.

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    Date of creation: 2009
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    Handle: RePEc:ags:iaae09:51620

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    Keywords: rational addiction; carbonated soft drinks; time-varying parameter model; Agricultural and Food Policy; Food Consumption/Nutrition/Food Safety;

    References

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    1. Zheng, Yuqing & Kaiser, Harry M., 2008. "Estimating Asymmetric Advertising Response: An Application to U.S. Nonalcoholic Beverage Demand," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(03), December.
    2. Gary S. Becker & Michael Grossman & Kevin M. Murphy, 1990. "An Empirical Analysis of Cigarette Addiction," NBER Working Papers 3322, National Bureau of Economic Research, Inc.
    3. Bentzen, J. & Eriksson, T. & Smith, V., 1997. "Rational Addiction and Alcohol Consumption: Evidence from the Nordic Countries," Papers 97-16, Aarhus School of Business - Department of Economics.
    4. Chang-Jin Kim & Jeremy M. Piger & Richard Startz, 2004. "Estimation of Markov regime-switching regression models with endogenous switching," Working Papers 2003-015, Federal Reserve Bank of St. Louis.
    5. Badi H. Baltagi & James M. Griffin, 2002. "Rational addiction to alcohol: panel data analysis of liquor consumption," Health Economics, John Wiley & Sons, Ltd., vol. 11(6), pages 485-491.
    6. Baltagi, Badi H & Griffin, James M, 2001. "The Econometrics of Rational Addiction: The Case of Cigarettes," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 449-54, October.
    7. Nilss Olekalns & Peter Bardsley, 1994. "Rational Addiction to Caffeine: an Analysis of Coffee Consumption," Working Papers 1994.21, School of Economics, La Trobe University.
    8. Steven T. Yen & Biing-Hwan Lin & David M. Smallwood & Margaret Andrews, 2004. "Demand for nonalcoholic beverages: The case of low-income households," Agribusiness, John Wiley & Sons, Ltd., vol. 20(3), pages 309-321.
    9. Grossman, Michael & Chaloupka, Frank J & Sirtalan, Ismail, 1998. "An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 39-48, January.
    10. Capps, Oral, Jr. & Griffin, James M., 1998. "Effect Of A Mass Merchandiser On Traditional Food Retailers," Journal of Food Distribution Research, Food Distribution Research Society, vol. 29(1), February.
    11. Frank J. Chaloupka & Michael Grossman & John A. Tauras, 1998. "The Demand for Cocaine and Marijuana by Youth," NBER Working Papers 6411, National Bureau of Economic Research, Inc.
      • Frank J. Chaloupka & Michael Grossman & John A. Tauras, 1999. "The Demand for Cocaine and Marijuana by Youth," NBER Chapters, in: The Economic Analysis of Substance Use and Abuse: An Integration of Econometrics and Behavioral Economic Research, pages 133-156 National Bureau of Economic Research, Inc.
    12. Richards, Timothy J. & Patterson, Paul M. & Tegene, Abebayehu, 2004. "Obesity And Nutrient Consumption: A Rational Addiction?," 2004 Annual meeting, August 1-4, Denver, CO 20079, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
    14. Michael Grossman & Frank J. Chaloupka & Charles C. Brown, 1996. "The Demand for Cocaine by Young Adults: A Rational Addiction Approach," NBER Working Papers 5713, National Bureau of Economic Research, Inc.
    15. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
    16. Frank J. Chaloupka, 1990. "Rational Addictive Behavior and Cigarette Smoking," NBER Working Papers 3268, National Bureau of Economic Research, Inc.
    17. Spinnewyn, Frans, 1981. "Rational habit formation," European Economic Review, Elsevier, vol. 15(1), pages 91-109.
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