Uniform Brand-Variant Pricing and Heterogeneous Firm Responses to Excise Taxes: Evidence from Six U.S. Cities

Abstract

Retailers commonly price diet and sugary sodas of the same brand and size uniformly. However, soda taxes are often applied to diet and sugary products differentially. In this paper, I document heterogeneous responses to sugar sweetened beverage taxes by uniform pricing retailers across six U.S. cities. Of the four national retail chains found in the data, one continues to price diet and sugary products uniformly. The remaining three adopt more flexible pricing strategies. Retailers that flexibly price brand variants have high tax pass-through rates, often close to one. However, the retailer that preserves uniform pricing substantially under-shifts the tax, showing that pass-through may be impacted by firm pricing strategies in response to the tax structure.