Behavioral Economics and the Demand for Alcohol: Results from the NLSY97

Henry Saffer (), Dhaval Dave and Michael Grossman

No 18180, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The 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.

JEL-codes: D03 I18 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-agr and nep-hea
Note: EH
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published as “A Behavioral Economic Model of Alcohol Advertising and Price”, in Health Economics. Volume 25, Issue 7, pages 816–828, July 2016

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