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Rational Addiction Evidence From Carbonated Soft Drinks

  • Xiaoou, Liu
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    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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    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
    Contact details of provider: Web page: http://www.iaae-agecon.org/Email:


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      • 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.
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    14. 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.
    15. 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.
    16. 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.
    17. 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.
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