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How Effective is Public Policy in Decreasing Soda Consumption? An Assessment of Four Policy Options

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Listed:
  • Yizao Liu

    (University of Connecticut)

  • Rigoberto A. Lopez

    (University of Connecticut)

  • Chen Zhu

    (University of Connecticut)

Abstract

This paper examines the effectiveness of four policy options to decrease the consumption of carbonated soft drinks (CSDs). They are: (1) a soda tax (1 cent per ounce), (2) a ban on television advertising, (3) limiting calories to 100 per 12 oz volume; and (4) banning large containers such as the 2 lt. bottle. We apply the Berry, Levinsohn and Pakes (1995) demand model to data for 12 CSD brands in 3 container sizes over seven cities and 36 months to estimate consumers’ preferences for CSD. Limiting the size of containers (e.g., banning the 2 lt. bottle) was found to be the most effective policy option and a tax on calories was found to be the weakest in terms of effectiveness in decreasing the consumption of CSDs. The declines in the national consumption of CSDs were found to be approximately -6.3%, -15.4%, -15.5% and -15.8 for a tax, advertising ban, limiting calories, and restricting container sizes, respectively.

Suggested Citation

  • Yizao Liu & Rigoberto A. Lopez & Chen Zhu, 2013. "How Effective is Public Policy in Decreasing Soda Consumption? An Assessment of Four Policy Options," Working Papers 19, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    • Handle: RePEc:zwi:wpaper:19
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    File URL: http://www.cag.uconn.edu/are/zwickcenter/documents/workingpapers/wp19.pdf
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    References listed on IDEAS

    as
    1. Chen Zhen & Michael K. Wohlgenant & Shawn Karns & Phillip Kaufman, 2010. "Habit Formation and Demand for Sugar-Sweetened Beverages," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(1), pages 175-193.
    2. Andreyeva, T. & Long, M.W. & Brownell, K.D., 2010. "The impact of food prices on consumption: A systematic review of research on the price elasticity of demand for food," American Journal of Public Health, American Public Health Association, vol. 100(2), pages 216-222.
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    4. Jean-Pierre Dubé, 2004. "Multiple Discreteness and Product Differentiation: Demand for Carbonated Soft Drinks," Marketing Science, INFORMS, vol. 23(1), pages 66-81, September.
    5. Dhar, Tirtha & Chavas, Jean- Paul & Cotterill, Ronald W. & Gould, Brian W., 2005. "An Economic Analysis of Brand-Level Strategic Pricing Between Coca-Cola Company and Pepsi," Working Papers 201538, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    6. Rigoberto A. Lopez & Kristen L. Fantuzzi, 2012. "Demand for carbonated soft drinks: implications for obesity policy," Applied Economics, Taylor & Francis Journals, vol. 44(22), pages 2859-2865, August.
    7. Jason M. Fletcher & David Frisvold & Nathan Tefft, 2010. "Can Soft Drink Taxes Reduce Population Weight?," Contemporary Economic Policy, Western Economic Association International, vol. 28(1), pages 23-35, January.
    8. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    9. Tirtha Dhar & Jean‐Paul Chavas & Ronald W. Cotterill & Brian W. Gould, 2005. "An Econometric Analysis of Brand‐Level Strategic Pricing Between Coca‐Cola Company and PepsiCo," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(4), pages 905-931, December.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Zheng, Hualu & Huang, Lu, 2014. "The Incidence of Soda Taxes with Imperfect Information and Strategic Firm Behavior," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170201, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    advertising; demand; policy; taxes; obesity; consumer behavior; sodas; carbonated soft drinks;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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