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You save money when you buy in bulk: does volume‐based pricing cause people to buy more beer?

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  • Jeremy W. Bray
  • Brett R. Loomis
  • Mark Engelen

Abstract

This paper uses supermarket scanner data to estimate brand‐ and packaging‐specific own‐ and cross‐price elasticities for beer. We find that brand‐ and packaging‐specific beer sales are highly price elastic. Cross‐price elasticity estimates suggest that individuals are more likely to buy a higher‐volume package of the same brand of beer than they are to switch brands. Policy simulations suggest that regulation of volume‐based price discounts is potentially more effective than a tax increase at reducing beer consumption. Our results suggest that volume‐based price discounting induces people to buy larger‐volume packages of beer and may lead to an increased overall beer consumption. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Jeremy W. Bray & Brett R. Loomis & Mark Engelen, 2009. "You save money when you buy in bulk: does volume‐based pricing cause people to buy more beer?," Health Economics, John Wiley & Sons, Ltd., vol. 18(5), pages 607-618, May.
    • Handle: RePEc:wly:hlthec:v:18:y:2009:i:5:p:607-618
    DOI: 10.1002/hec.1403
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    References listed on IDEAS

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    1. Manning, Willard G., 1998. "The logged dependent variable, heteroscedasticity, and the retransformation problem," Journal of Health Economics, Elsevier, vol. 17(3), pages 283-295, June.
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    1. Brian Dillon & Joachim De Weerdt & Ted O’Donoghue, 2021. "Paying More for Less: Why Don’t Households in Tanzania Take Advantage of Bulk Discounts?," The World Bank Economic Review, World Bank Group, vol. 35(1), pages 148-179.
    2. Daniel Toro-Gonzalez & Jia Yan & R. Karina Gallardo & Jill J. McCluskey, 2013. "Estimation of Unobserved Attributes Using a Control Function Approach, Modeling the Demand for Mint Flavored Gum," Working Papers 2013-06, School of Economic Sciences, Washington State University.
    3. Toro-Gonzalez, Daniel & McCluskey, Jill J. & Mittelhammer, Ron, 2014. "Beer Snobs Do Exist: Estimation of Beer Demand by Type," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 39(2), pages 1-14.
    4. Trey Malone & Jayson L. Lusk, 2019. "Releasing The Trap: A Method To Reduce Inattention Bias In Survey Data With Application To U.S. Beer Taxes," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 584-599, January.
    5. Ruhm, Christopher J. & Jones, Alison Snow & McGeary, Kerry Anne & Kerr, William C. & Terza, Joseph V. & Greenfield, Thomas K. & Pandian, Ravi S., 2012. "What U.S. data should be used to measure the price elasticity of demand for alcohol?," Journal of Health Economics, Elsevier, vol. 31(6), pages 851-862.
    6. Xiaonan Liu & Jeffrey T. LaFrance & Hayley H. Chouinard & Thomas L. Marsh, 2013. "A Generalized Utility Model with Binding Non-Negativity Constraints: Demand for Beer," 2013 Papers pli830, Job Market Papers.

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