Estimating consumer preferences for different beverages using the BLP approach

Catherine Haeck, Nicholas Lawson and Krystel Poirier
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Krystel Poirier: Department of Economics, University of Quebec in Montreal

No 22-01, Working Papers from Research Group on Human Capital, University of Quebec in Montreal's School of Management

Abstract: The overconsumption of sugar is a significant problem in many jurisdictions, and one possible method to remedy this problem is the taxation of sugar- sweetened beverages (SSBs). To be able to implement an optimal tax, it is important to know the preferences and price sensitivity of consumers. This article therefore estimates the price elasticity of demand for different beverages in Quebec, using the Berry, Levinsohn and Pakes (BLP) random parameter logistic demand model, combined with Nielsen data from 2010 to 2016 and the 2016 Canadian Census. The results suggest that the average consumer prefers high-calorie beverages containing fruits and vegetables, and the estimated price elasticities are between -4.40 (energy drinks) and -1.59 (regular soft drinks). As a result, consumers of energy drinks appear to reduce their consumption the most in the face of rising prices, whereas consumers of soft drinks will decrease their consumption the least. However, at a general level, the implementation of a tax on SSBs in Quebec should generate a significant reduction in consumption.

Keywords: sugar-sweetened beverages; price elasticity of demand; BLP; taxation (search for similar items in EconPapers)
JEL-codes: D12 H23 I12 I18 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2022-03
New Economics Papers: this item is included in nep-hea
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Journal Article: Estimating consumer preferences for different beverages using the BLP approach (2022)
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