4.3 Article

YOU SAVE MONEY WHEN YOU BUY IN BULK: DOES VOLUME-BASED PRICING CAUSE PEOPLE TO BUY MORE BEER?

Journal

HEALTH ECONOMICS
Volume 18, Issue 5, Pages 607-618

Publisher

WILEY
DOI: 10.1002/hec.1403

Keywords

alcohol; price elasticity; brand substitution

Funding

  1. Robert Wood Johnson Foundation Substance Abuse Policy Research Program [052446]
  2. National Institute of Alcoholism and Alcohol Abuse (NIAAA) [1-R01-AA12788, R01-AA013925-03]

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This paper uses supermarket scanner data to estimate brand- and packaging-specific own- and cross-price elasticities for beer. We find that brand- and packaging-specific beer sales are highly price elastic. Cross-price elasticity estimates Suggest that individuals are more likely to buy a higher-volume package of the same brand of beer than they are to switch brands. Policy simulations suggest that regulation of volume-based price discounts is potentially more effective than a tax increase at reducing beer consumption. Our results suggest that volume-based price discounting induces people to buy larger-volume packages of beer and may lead to an increased overall beer consumption. Copyright (c) 2008 John Wiley & Sons, Ltd.

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