Habit Formation and Demand for Sugar-Sweetened Beverages

Chen Zhen, Michael Wohlgenant (), Shawn Karns and Phillip Kaufman

American Journal of Agricultural Economics, 2010, vol. 93, issue 1, 175-193

Abstract: Using scanner data, we estimated demand for nine nonalcoholic beverages under habit formation. We found strong evidence for habit formation. Although demand for sugar-sweetened beverages by low-income households is less elastic to own-price changes compared with high-income households, there is evidence that high-income households consider beverages to be more substitutable than low-income households do. A half-cent per ounce tax on store-purchased sugar-sweetened beverages will result in a moderate reduction in consumption of sugar-sweetened beverages for both income strata. Because of habit formation, long-run national tax revenue from a sugar-sweetened beverage tax is about 15 to 20% lower than short-run revenue. Copyright 2010, Oxford University Press.

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:93:y:2010:i:1:p:175-193

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