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Taxing sugar‐sweetened beverages: A nonlinear pricing approach

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  • José G. Nuño‐Ledesma
  • Steven Y. Wu
  • Joseph V. Balagtas

Abstract

Taxation is frequently implemented to discourage the consumption of sugary beverages. Despite their popularity, little is known about the impacts of taxes when sellers practice price discrimination. To address this issue, we use a standard nonlinear pricing model with one product and two buyer types to study the effects of taxation on (i) consumption, (ii) consumer and producer surpluses, and (iii) the seller's choice of market segmentation scheme. We find that a tax would lead to reductions in consumption, consumer surplus, and expected profit. Additionally, the measure increases the likelihood that the sellers would exclude buyers with low preferences for the beverage to exclusively serve buyers with high willingness to pay for the product.

Suggested Citation

  • José G. Nuño‐Ledesma & Steven Y. Wu & Joseph V. Balagtas, 2024. "Taxing sugar‐sweetened beverages: A nonlinear pricing approach," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(2), pages 967-981, March.
    • Handle: RePEc:wly:ajagec:v:106:y:2024:i:2:p:967-981
    DOI: 10.1111/ajae.12416
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    References listed on IDEAS

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    2. Jeffrey Grogger, 2017. "Soda Taxes And The Prices of Sodas And Other Drinks: Evidence From Mexico," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 99(2), pages 481-498.
    3. Christine Moorman & Rosellina Ferraro & Joel Huber, 2012. "Unintended Nutrition Consequences: Firm Responses to the Nutrition Labeling and Education Act," Marketing Science, INFORMS, vol. 31(5), pages 717-737, September.
    4. Michael L. Anderson & David A. Matsa, 2011. "Are Restaurants Really Supersizing America?," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 152-188, January.
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