Time Inconsistency and Alcohol Sales Restrictions
Kilts Center for Marketing at Chicago Booth – Nielsen Dataset Paper Series 2-047
52 Pages Posted: 21 May 2016
Date Written: May 1, 2016
Restrictions on alcohol sales hours or days are commonly used tools in order to reduce alcohol consumption. However, a forward-looking consumer can buy in advance, and thereby mostly undo the impact of the restriction. I study whether time inconsistent consumer preferences can provide a justification for restrictions on alcohol sales time. I estimate a demand model, which allows a fraction of consumers to be time inconsistent, using scanner data of beer purchases and other shopping behavior. According to the estimation results, 16% of regular beer buyers, or only 3% of all consumers, behave as if they are time inconsistent. I find that in terms of consumer welfare, the sales restriction may be welfare improving, but is worse than increasing taxes.
Keywords: behavioral economics, time inconsistent preferences, consumer demand, alcohol, public health policy
JEL Classification: D03, D12, I18, L51, L66
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