TY  - JOUR
AU  - Saffer,Henry
AU  - Dave,Dhaval
AU  - Grossman,Michael
TI  - Behavioral Economics and the Demand for Alcohol: Results from the NLSY97
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18180
PY  - 2012
Y2  - June 2012
UR  - http://www.nber.org/papers/w18180
L1  - http://www.nber.org/papers/w18180.pdf
N1  - Author contact info:
Henry Saffer
NBER
365 Fifth Avenue, 5th Floor
New York, NY  10016-4309
Tel: 212/817-7956
Fax: 212/817-1597
E-Mail: hsaffer@gc.cuny.edu

Dhaval M. Dave
Bentley University
Department of Economics
175 Forest Street, AAC 195
Waltham, MA 02452-4705
Tel: 212/817-7955
Fax: 212/817-1597
E-Mail: ddave@bentley.edu

Michael Grossman
Ph.D. Program in Economics
City University of New York Graduate Center
365 Fifth Avenue, 5th Floor
New York, NY  10016-4309
Tel: 212/817-7959
Fax: 212/817-1597
E-Mail: mgrossman@gc.cuny.edu
AB  - The behavioral economic model presented in this paper argues that the effect of advertising and price differ by past consumption levels.  The model predicts that advertising is more effective in reducing consumption at high past consumption levels but less effective at low past consumption levels.  Conversely, the model predicts that higher prices are effective in reducing consumption at low past consumption levels but less effective at high past consumption levels.  Unlike the models used in most prior studies, this model predicts that the effects of policy on average consumption and on the upper end of the distribution are different. 

Both FMM and Quantile models were estimated.  The results from these regressions show that heavy drinkers are more responsive to advertising and less responsive to price than are moderate drinkers.  The empirical evidence also supports the assumption that education is a proxy for self-regulation.  The key conclusions are that restrictions on advertising are targeted at heavy drinkers and are an underutilized alcohol control policy.  Higher excise taxes on alcohol reduce consumption by moderate drinkers and are of less importance in reducing heavy consumption.
ER  -