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Evidence of rational addiction to carbonated soft drinks?

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  • Xiaoou Liu
  • Rigoberto Lopez

Abstract

Purpose - The purpose of this paper is to apply the Becker-Murphy theory of rational addiction to the case of carbonated soft drinks. The research aims to reveal the rational addiction evidence of carbonated soft drinks and derive policy implications under this evidence. Consumers' rational addictive evidence for carbonated soft drinks provides a warning for the Chinese government to regulate the industry, due to its bad health consequences. Design/methodology/approach - The authors empirically apply a time-varying parameter model and scanner data set from 46 US cities. Findings - 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, which implies a limited role for taxes to curb consumption but a strong role to raise revenue to fund health promotion programs. Originality/value - This is the first study to test the rational addiction nature of carbonated soft drinks, thus adding to the scarce economic literature on food addiction. Although the empirical results derived are based on soft drink consumption in the USA, China is experiencing a similar consumption increase in carbonated soft drinks as in the USA, in the examined period. Therefore, the lessons from the USA are also valuable for the public policy makers in China.

Suggested Citation

  • Xiaoou Liu & Rigoberto Lopez, 2012. "Evidence of rational addiction to carbonated soft drinks?," China Agricultural Economic Review, Emerald Group Publishing, vol. 4(3), pages 300-317, August.
  • Handle: RePEc:eme:caerpp:v:4:y:2012:i:3:p:300-317
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    References listed on IDEAS

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