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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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    Web page: http://www.iaae-agecon.org/
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    Related research

    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. 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.
    2. 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.
    3. repec:ltr:wpaper:1994.21 is not listed on IDEAS
    4. Gary S. Becker & Michael Grossman & Kevin M. Murphy, 1990. "An Empirical Analysis of Cigarette Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 61, Chicago - Center for Study of Economy and State.
    5. Michael Grossman & Frank J. Chaloupka & Ismail Sirtalan, 1995. "An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels," NBER Working Papers 5200, National Bureau of Economic Research, Inc.
    6. Kim, Chang-Jin & Piger, Jeremy & Startz, Richard, 2008. "Estimation of Markov regime-switching regression models with endogenous switching," Journal of Econometrics, Elsevier, vol. 143(2), pages 263-273, April.
    7. Grossman, Michael & Chaloupka, Frank J., 1998. "The demand for cocaine by young adults: a rational addiction approach," Journal of Health Economics, Elsevier, vol. 17(4), pages 427-474, August.
    8. 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.
    9. 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.
    10. Frank J. Chaloupka, 1990. "Rational Addictive Behavior and Cigarette Smoking," NBER Working Papers 3268, National Bureau of Economic Research, Inc.
    11. 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.
    12. 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.
    13. Olekalns, Nilss & Bardsley, Peter, 1996. "Rational Addiction to Caffeine: An Analysis of Coffee Consumption," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1100-1104, October.
    14. Spinnewyn, Frans, 1981. "Rational habit formation," European Economic Review, Elsevier, vol. 15(1), pages 91-109.
    15. 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.
    16. 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.
    17. 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).
    18. 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.
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