You save money when you buy in bulk: does volume-based pricing cause people to buy more beer?

This paper uses supermarket scanner data to estimate brand‐ and packaging‐specific own‐ and cross‐price elasticities for beer. We find that brand‐ and packaging‐specific beer sales are highly price elastic. Cross‐price elasticity estimates suggest that individuals are more likely to buy a higher‐vol...

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Bibliographic Details
Published in:Health economics 2009-05, Vol.18 (5), p.607-618
Main Authors: Bray, Jeremy W., Loomis, Brett R., Engelen, Mark
Format: Article
Language:English
Subjects:
alcohol
Alcohol use
Beer
Beer - economics
Beer - supply & distribution
brand substitution
Brands
Commerce - economics
Consumption
Elasticities
Health economics
Income
Models, Econometric
Motivation
Price elasticity
Price regulations
Prices
Product Packaging - economics
Simulation
Studies
United States
Volume discount
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Summary:This paper uses supermarket scanner data to estimate brand‐ and packaging‐specific own‐ and cross‐price elasticities for beer. We find that brand‐ and packaging‐specific beer sales are highly price elastic. Cross‐price elasticity estimates suggest that individuals are more likely to buy a higher‐volume package of the same brand of beer than they are to switch brands. Policy simulations suggest that regulation of volume‐based price discounts is potentially more effective than a tax increase at reducing beer consumption. Our results suggest that volume‐based price discounting induces people to buy larger‐volume packages of beer and may lead to an increased overall beer consumption. Copyright © 2008 John Wiley & Sons, Ltd.
ISSN:1057-9230
1099-1050
DOI:10.1002/hec.1403