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Time inconsistency and alcohol sales restrictions

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  • Hinnosaar, Marit

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.

Suggested Citation

  • Hinnosaar, Marit, 2016. "Time inconsistency and alcohol sales restrictions," European Economic Review, Elsevier, vol. 87(C), pages 108-131.
    • Handle: RePEc:eee:eecrev:v:87:y:2016:i:c:p:108-131
    DOI: 10.1016/j.euroecorev.2016.04.012
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    Cited by:

    1. Marit Hinnosaar & Elaine M. Liu, 2020. "Persistence in alcohol consumption: evidence from migrants," Carlo Alberto Notebooks 620, Collegio Carlo Alberto.
    2. Michael D. Grubb, 2015. "Behavioral Consumers in Industrial Organization," Boston College Working Papers in Economics 879, Boston College Department of Economics.
    3. Christensen, Else Gry Bro & Nafziger, Julia, 2016. "Packaging of sin goods – Commitment or exploitation?," Journal of Economic Behavior & Organization, Elsevier, vol. 122(C), pages 62-74.
    4. Marcus, Jan & Siedler, Thomas, 2015. "Reducing binge drinking? The effect of a ban on late-night off-premise alcohol sales on alcohol-related hospital stays in Germany," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 0, pages 55-77.
    5. Michel, Christian & Stenzel, André, 2021. "Model-based evaluation of cooling-off policies," Games and Economic Behavior, Elsevier, vol. 129(C), pages 270-293.
    6. Kfir Eliaz & Ran Spiegler, 2015. "Beyond “Ellison’s Matrix”: New Directions in Behavioral Industrial Organization," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 259-272, November.
    7. Avdic, Daniel & von Hinke, Stephanie, 2021. "Extending alcohol retailers’ opening hours: Evidence from Sweden," European Economic Review, Elsevier, vol. 138(C).
    8. Itzhak Ben-David & Marieke Bos, 2021. "Impulsive Consumption and Financial Well-Being: Evidence from an Increase in the Availability of Alcohol [Identification of causal effects using instrumental variables]," The Review of Financial Studies, Society for Financial Studies, vol. 34(5), pages 2608-2647.
    9. Lawrence Jin & Minwook Kang, 2022. "Addiction, present‐bias, and self‐restraint," Southern Economic Journal, John Wiley & Sons, vol. 89(1), pages 138-159, July.
    10. Elias Bouacida & Daniel Martin, 2021. "Predictive Power in Behavioral Welfare Economics," Journal of the European Economic Association, European Economic Association, vol. 19(3), pages 1556-1591.
    11. Hyungsuk Byun & Barry Scholnick, 2017. "Spatial Commitment Devices and Addictive Goods: Evidence from the Removal of Slot Machines from Bars," Working Papers 17-34, Federal Reserve Bank of Philadelphia.
    12. Hinnosaar, Marit & Liu, Elaine M., 2022. "Malleability of Alcohol Consumption: Evidence from Migrants," Journal of Health Economics, Elsevier, vol. 85(C).
    13. Yandisa Ngqangashe & Maddie Heenan & Melanie Pescud, 2021. "Regulating Alcohol: Strategies Used by Actors to Influence COVID-19 Related Alcohol Bans in South Africa," IJERPH, MDPI, vol. 18(21), pages 1-16, October.
    14. Cherchye, Laurens & De Rock, Bram & Griffith, Rachel & O’Connell, Martin & Smith, Kate & Vermeulen, Frederic, 2020. "A new year, a new you? Within-individual variation in food purchases," European Economic Review, Elsevier, vol. 127(C).
    15. Bokhari, Farasat A.S. & Dobson, Paul W. & Morciano, Marcello & Suhrcke, Marc, 2023. "Banning volume discounts to curb excessive consumption: A cautionary tale," European Economic Review, Elsevier, vol. 156(C).
    16. Giovanni Immordino & Anna Maria C. Menichini & Maria Grazia Romano, 2020. "Taxing and Regulating Vices," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(2), pages 622-647, April.
    17. Witvorapong, Nopphol & Watanapongvanich, Somtip, 2020. "Using pre-commitment to reduce alcohol consumption: Lessons from a quasi-experiment in Thailand," Socio-Economic Planning Sciences, Elsevier, vol. 70(C).
    18. Jin, Lawrence & Kang, Minwook, 2023. "Human-capital investments as a commitment device," Economic Modelling, Elsevier, vol. 126(C).
    19. repec:hal:wpaper:halshs-01489252 is not listed on IDEAS

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    More about this item

    Keywords

    Behavioral economics; Time inconsistent preferences; Consumer demand; Alcohol; Public health policy;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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