Abstract

http://ssrn.com/abstract=2089252
 


 



Behavioral Economics and the Demand for Alcohol: Results from the Nlsy97


Henry Saffer


National Bureau of Economic Research (NBER)

Dhaval Dave


Bentley University - Department of Economics; National Bureau of Economic Research (NBER), at New York

Michael Grossman


National Bureau of Economic Research (NBER), NY Office; City University of New York Graduate Center

June 2012

NBER Working Paper No. w18180

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.

Number of Pages in PDF File: 30

working papers series





Date posted: June 22, 2012  

Suggested Citation

Saffer, Henry and Dave, Dhaval and Grossman, Michael, Behavioral Economics and the Demand for Alcohol: Results from the Nlsy97 (June 2012). NBER Working Paper No. w18180. Available at SSRN: http://ssrn.com/abstract=2089252

Contact Information

Henry Saffer (Contact Author)
National Bureau of Economic Research (NBER) ( email )
365 Fifth Avenue, 5th Floor
Fifth Floor
New York, NY 10016-4309
United States
212-817-7956 (Phone)
212-817-1597 (Fax)
Dhaval Dave
Bentley University - Department of Economics ( email )
175 Forest Street
Waltham, MA 02452-4705
United States
National Bureau of Economic Research (NBER), at New York
365 Fifth Avenue, 5th Floor
New York, NY 10016-4309
United States
Michael Grossman
National Bureau of Economic Research (NBER), NY Office ( email )
365 Fifth Avenue, 5th Floor
New York, NY 10016-4309
United States
212-817-7959 (Phone)
212-817-1597 (Fax)
City University of New York Graduate Center ( email )
365 Fifth Avenue, 5th Floor
New York, NY 10016
United States
212-817-7959 (Phone)
212-817-1597 (Fax)
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