Behavioral Economics and the Demand for Alcohol: Results from the NLSY97
AbstractThe behavioral economic model presented in this paper argues that the effect of advertising and price differ by past consumption levels. The model predicts that advertising is more effective in reducing consumption at high past consumption levels but less effective at low past consumption levels. Conversely, the model predicts that higher prices are effective in reducing consumption at low past consumption levels but less effective at high past consumption levels. Unlike the models used in most prior studies, this model predicts that the effects of policy on average consumption and on the upper end of the distribution are different. Both FMM and Quantile models were estimated. The results from these regressions show that heavy drinkers are more responsive to advertising and less responsive to price than are moderate drinkers. The empirical evidence also supports the assumption that education is a proxy for self-regulation. The key conclusions are that restrictions on advertising are targeted at heavy drinkers and are an underutilized alcohol control policy. Higher excise taxes on alcohol reduce consumption by moderate drinkers and are of less importance in reducing heavy consumption.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18180.
Date of creation: Jun 2012
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Find related papers by JEL classification:
- D03 - Microeconomics - - General - - - Behavioral Economics; Underlying Principles
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-07-01 (Agricultural Economics)
- NEP-ALL-2012-07-01 (All new papers)
- NEP-HEA-2012-07-01 (Health Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Craig A. Gallet, 2007.
"The demand for alcohol: a meta-analysis of elasticities,"
Australian Journal of Agricultural and Resource Economics,
Australian Agricultural and Resource Economics Society, vol. 51(2), pages 121-135, 06.
- Gallet, Craig A., 2007. "The demand for alcohol: a meta-analysis of elasticities," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(2), June.
- Padmaja Ayyagari & Partha Deb & Jason Fletcher & William T. Gallo & Jody L. Sindelar, 2009. "Sin Taxes: Do Heterogeneous Responses Undercut Their Value?," NBER Working Papers 15124, National Bureau of Economic Research, Inc.
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