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An Economic Analysis of Beverage Size Restrictions

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  • Bourquard, Brian
  • Wu, Steven

Abstract

We model the potential efficiency and distributional consequences of a government beverage-size restriction that is designed to curb or reduce consumption of sugar-sweetened beverages. Unsurprisingly, we find that a credibly implemented restriction can curb consumption, particularly by “high-type” consumers who consume large amounts of sweetened beverages. Surprisingly, we find that for small to moderate restrictions that might be consistent with the magnitude of the NYC soda-ban, consumer welfare will be unaffected by the regulation. Instead, most consumption inefficiency induced welfare losses will be borne by sellers. Thus, policy debates concerning welfare losses from soft-drink sales should focus on business losses rather than consumer welfare losses.

Suggested Citation

  • Bourquard, Brian & Wu, Steven, 2016. "An Economic Analysis of Beverage Size Restrictions," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235691, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea16:235691
    DOI: 10.22004/ag.econ.235691
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    References listed on IDEAS

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    1. Robert H. Lustig & Laura A. Schmidt & Claire D. Brindis, 2012. "The toxic truth about sugar," Nature, Nature, vol. 482(7383), pages 27-29, February.
    2. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
    3. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
    4. Joanna P. MacEwan & Julian M. Alston & Abigail M. Okrent, 2014. "The Consequences of Obesity for the External Costs of Public Health Insurance in the United States," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 36(4), pages 696-716.
    5. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
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    Cited by:

    1. Balagtas, Joseph V. & Nuno-Ledesma, Jose G. & Wu, Steven Y., 2016. "Effects of “Fat Taxes” on Package Sizes, and Welfare Distribution," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 252704, Agricultural and Applied Economics Association.

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