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

See all articles by Marit Hinnosaar

Marit Hinnosaar

University of Turin - Collegio Carlo Alberto; University of Nottingham

Date Written: May 1, 2016

Abstract

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

Suggested Citation

Hinnosaar, Marit, Time Inconsistency and Alcohol Sales Restrictions (May 1, 2016). Kilts Center for Marketing at Chicago Booth – Nielsen Dataset Paper Series 2-047, Available at SSRN: https://ssrn.com/abstract=2779714 or http://dx.doi.org/10.2139/ssrn.2779714

Marit Hinnosaar (Contact Author)

University of Turin - Collegio Carlo Alberto ( email )

Piazza Arbarello
8
Torino, Torino 10122
Italy

HOME PAGE: http://marit.hinnosaar.net/

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

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