Product Variety and Alcohol Purchases

Abstract

This study investigates the impact of product variety on alcohol purchasing patterns in the United States. Although per capita alcohol consumption declined between 1970 and 2000, it has experienced a gradual increase in recent years. By utilizing product-level and household scanner data, I provide evidence that increased product variety contributes to higher alcohol purchases. Using residential changes, I establish a causal link between these factors. Consequently, the growth in product variety is a key driver of the recent shifts in alcohol consumption. I present a stylized model illustrating that heightened consumer health awareness may lead to larger product assortments, counterbalancing the effects of reduced purchases. Additionally, as predicted by theory, tax hikes encourage retailers to broaden their product offerings, partially counteracting the intended impact on purchases. In conclusion, this research highlights that regulation of product entries represents an underexplored yet significant policy tool for curbing alcohol consumption.

Keywords: Risky Consumption, Product Variety, Alcohol, Excise Tax

JEL Classification: D12, I12, L66