Disaggregated econometric estimation of consumer demand response by alcoholic beverage types

The paper presents estimates of price elasticities of demand for 12 disaggregated alcoholic beverages in Australia: premium beer, full strength beer, low alcohol beer and mid‐strength beer; red bottled wine, white bottled wine, sparkling wine, cask wine; dark and light ready‐to‐drink (RTD); and dark and light spirits. These disaggregated categories correspond closely to the commodities of interest to public policymakers with respect to taxation and health policies. The system of demand equations is estimated with Nielsen's data using a semiflexible Almost Ideal Demand System model in order to impose negative semi‐definiteness on the demand parameters. Results indicate elastic own‐price elasticities for virtually all commodities. Cross‐price elasticities suggest that beverages most linked with negative externalities, namely full strength beer, dark RTD and dark spirits, may need to be taxed jointly. Any proposed tax increase to cask wine may also result in consumers shifting demand to more undesirable beverages. The elasticity estimates are used to illustrate the effect of a hypothetical change towards taxation equalisation based on alcohol content. These elasticities offer crucially needed inputs for analysing any tax change policies.     

Three facts about marijuana prices*

Australians are among the largest consumers of marijuana in the world, and estimates show that their expenditure on marijuana is approximately twice that on wine. In the present paper, the evolution of Australian marijuana prices over the last decade is analysed, and a decline in real terms by almost 40 per cent is shown. This decline is far above that experienced by most agricultural products. Why has this occurred and what are the implications? One possible reason is the adoption of hydroponic growing techniques that have enhanced productivity and lowered costs and prices. Another reason is that laws have become softer and penalties reduced. Patterns in prices are found that divide the country into three broad regions: (i) Sydney, where prices are highest; (ii) Melbourne and Canberra, which have somewhat lower prices; and (iii) everywhere else, where marijuana is cheapest. An exploratory analysis indicates the extent to which the price declines have stimulated marijuana consumption and inhibited the consumption of a substitute product, alcohol.     

Evolving from a rum state: Australia's alcohol consumption

Europeans settlers in the Australian colonies had a reputation of being heavy drinkers. Rum dominated during the first few decades, followed by beer. It took until the 1970s before Australia's annual per capita consumption of wine exceeded 10 L, and even then, wine represented only one‐fifth of national alcohol consumption. But over the next two decades, per capita wine consumption nearly trebled and beer consumption shrunk – the opposite of what happened to global alcohol consumption shares. This paper draws on newly compiled data sets to (i) reveal that Australia was not much more alcoholic than Britain or southern Europe during the nineteenth century and (ii) help explain why it took so long for a consumer interest in wine to emerge in Australia.     

The Importance of Intrinsic and Extrinsic Sparkling Wine Characteristics and Behavior of Sparkling Wine Consumers in Croatia

ABSTRACT

Sparkling wines accounted for 7.7% of the total wine consumption in 2011 in the world. Even though sparkling wine remains a long way behind still wine in total volume of production, world consumption of sparkling wine is expected to grow at a faster rate with an 8.5% increase by 2016. Although Croatia is a country with a high residual per capita consumption, the share of sparkling wine consumption compared with total wine consumption amounts only 1.3%. To collect data on Croatian sparkling wine consumers’ behavior and attitudes, we performed online research with 273 consumers. The research confirmed the low frequency of sparkling wine consumption. The most important characteristics of sparkling wines for Croatian consumers are their intrinsic characteristics (taste, smell) together with price:quality ratio, while visual appearance, expert reviews, or wine prizes are less important. Consumption of sparkling wines is generally associated with specific celebrations. Due to such perception of exclusive wine use, there is a need to break down this prejudice by better sparkling wine promotion through wine-tasting events, seminars, and gastronomy offers, especially for younger consumers.     

Taxes and quality: A market–level analysis

A conventional assumption of product homogeneity when the commodity of interest is actually heterogeneous will lead to errors in an analysis of the incidence of policies, such as taxes. In this article, an equilibrium displacement model is used to derive analytical solutions for price, quantity, and quality effects of ad valorem and per unit taxes. The results show how parameters determine the effects of tax policies on quality. The potential for tax–induced distortions in quality, and the distributive consequences of those distortions, are illustrated in a case study of the market for Australian wine.     

Hedonic wine price functions with different prices

This study examines the impact that recommended retail prices, actual market prices and the release of a prominent wine guide have on Australian wine hedonic price estimates, for attributes such as sensory quality, winery reputation and grape region. In general, hedonic price estimates appear to be independent of prices employed. The main identified differences in estimates relate to the size of the producer and some regional impacts. For market prices only, increases in producer size are estimated to reduce prices. This implies the existence of supply chain quantity discounting price practices. The impact of an authoritative wine guide appears to have a negligible influence on prices in Australia. In the absence of market transaction prices, the common practice of employing recommended prices for hedonic wine price estimation is defendable.     

Combining an inter-sectoral carbon tax with sectoral mitigation policies: Impacts on the French forest sector

As France works out its plan to tackle climate change issues, questions are arising in the forest sector as to how sectoral mitigation programs such as those designed to enhance fuelwood consumption or to stimulate in-forest carbon sequestration may coincide with an inter-sectoral program such as an economy-wide carbon tax. This paper provides insights into this question by exploring the impacts of (1) a combination of a carbon tax and a fuelwood policy, and (2) a combination of a carbon tax and a sequestration policy on (i) the economy of the forest sector, and (ii) the dynamics of the forest resource. To do this, we used a modified version of the French Forest Sector Model (FFSM) and carried out simulations on a 2020 time horizon. Basing our analysis on the fuelwood sector, we showed that wood producers always benefit from the combination of a carbon tax with either a fuelwood policy or a sequestration policy at the national level. Conversely, and although it favors wood products instead of non-wood substitutes, a carbon tax always decreases consumer surpluses by increasing wood product prices. As a consequence, the combination of a carbon tax with sectoral policies is likely to raise questions about the political economy of the mitigation program. This is particularly true in the case of a combination of a carbon tax with a sequestration policy, which already decreases consumer surpluses. We eventually showed that by increasing transport costs between domestic regions, the carbon tax reallocates production patterns over French territory which could lead to the necessity of a regional breakdown of policy-mixes in the forest sector.     

Economic Effects of the Consumer‐oriented Genetically Modified Products in Markets with a Labelling Regime

This paper builds on the literature on the economic effects of the second‐generation, consumer‐oriented genetically modified products (GMPs). It analyses the market and welfare impacts of the introduction of these new products in markets, like the EU, that mandate the segregation and labelling of the first‐generation, producer‐oriented GMPs. Developing an empirically relevant model of heterogeneous consumers and producers, the study determines the effects of the consumer‐oriented GMPs on the markets of conventional, GM and organic products, and the welfare of consumers and agricultural producers. Analytical results indicate that the market effects of the new GMPs are case specific and depend on: (i) the consumer valuation of the quality‐enhancing attribute of the new GMP; (ii) the level of consumer aversion to GMOs; (iii) the strength of consumer preference for organic products; and (iv) the production costs and marketing margins in the different supply channels. The policy on the labelling of the first‐generation GMPs does not affect the impacts of the second‐generation GMPs on the quantities and market shares of the different products. However, it does affect their price effects and welfare implications. The introduction of consumer‐oriented GMPs under a mandatory labelling regime can result in losses for some GM consumers and all producers of the conventional product.     

Consumer Valuation of Environmentally Friendly Production Practices in Wines,considering Asymmetric Information and Sensory Effects

Agricultural producers and food marketers are increasingly responding to environmentally friendly cues from consumers, even though privately appropriated values associated with a range of food products commonly rank above their public‐good counterparts. Wine can be considered an ideal product to examine these issues given consumers’ highly subjective sensory preferences towards wine, and a winegrape production process that is relatively intensive in the use of chemical inputs for the control of disease and infection. Semi‐dry Riesling wines made from field research trials following environmentally friendly canopy management practices were utilised in a lab experiment to better understand preferences for environmental attributes in wine. A combined sensory and monetary evaluation framework explicitly considered asymmetric order effects. Empirical results revealed that sensory effects dominate extrinsic environmental attributes. Once consumer willingness to pay (WTP) was conditioned on a wine’s sensory attributes, the addition of environmentally friendly information did not affect their WTP; however, adding sensory information significantly influenced WTP initially based only on environmental attributes. The results confirm the idea that promoting environmentally friendly winegrape production practices would increase demand and lead to higher premiums for the products, but are only sustainable if consumers’ sensory expectations are met on quality.     

Product quality and value from consumer perspective—An application to wooden products

Product quality as perceived by consumers is studied with the use of empirical survey data on wooden flooring/panelling materials and on wooden furniture markets in Finland. The results indicate that consumers’ quality perceptions are consistent for the two product categories. Perceived product quality may be understood as a hierarchical structure, which consists of tangible and intangible dimensions, and is fairly consistent for different products. The most abstract dimensions are reflected in more specific sub-dimensions and product attributes. For consumers, the quality of the tangible product is more important than the quality of the product intangibles in the case of wooden products. Perceived product value is determined as customers’ judgement of the relationship between perceived product quality and price. It was also observed to be a two-dimensional structure with tangible and intangible dimensions. The observed dimensions of perceived product quality and value were logically linked.     

The Welfare Economics of a Biofuel Tax Credit and the Interaction Effects with Price Contingent Farm Subsidies

A framework is developed to analyze the effects of a biofuel consumer tax exemption and the interaction effects with a price contingent farm subsidy. Ethanol prices rise above the gasoline price by the amount of the tax credit. Corn farmers gain directly while gasoline consumers only gain from any reduction in world oil prices due to the extra ethanol production. Domestic oil producers lose. Historically, the intercept of the ethanol supply curve is above the gasoline price. Hence, part of the tax credit is redundant and represents "rectangular" deadweight costs that dwarf triangular deadweight cost measures of traditional farm subsidies.     

Voting for Environmental Policy Under Income and Preference Heterogeneity

We examine the design of policies for promoting the consumption of green products under preference and income heterogeneity using organic food as an example. Two instruments are considered: a price subsidy for organic food products and a tax on conventional products. When the income differences and social benefits of organic farming are large, these factors dominate in shaping the policy preferences of the majority. In this case, the environmental policies preferred by the majority tend to be stricter than socially optimal policies. However, when income differences are small, policy preferences are more directly determined by tastes for organic products and the majority may prefer no intervention.     

Dual discounting in climate change mitigation in the forest sector

The efficiency of potential climate change mitigation is predicated on future costs and benefits and thus heavily influenced by the discount scheme. Dual discounting involves discounting carbon and monetary values differently; stand level modeling efforts show that it improves the profitability of afforestation projects. However, these stand level results may not hold across other age classes and stocking levels. Using a partial, spatial equilibrium model of the Norwegian forest sector, we analyze the impacts of a dual discounting scheme on climate change mitigation efforts. Dual discounting results in less mitigation efforts in the first decades but substantially higher long-term mitigation efforts.     

A cost-benefit analysis of a public labelling scheme of fish quality

The purpose of this paper is to introduce a new method capable of evaluating the economic welfare for quality graded fish products using the hedonic price method for plaice in Denmark. Today, no labelling scheme exists for the final consumers of different qualities of fish. A scheme only exists at the first hand market. On this basis, a general applicable, theoretical and empirical method is developed to compare the costs and benefits of the hypothetical choice between the total absence of labelling and the presence of a public labelling scheme, which fully informs consumers on the quality and simultaneously allows the producers to differentiate prices between quality grades. It is shown that the economic welfare associated with a public labelling scheme is at minimum €263,000. Sensitivity analysis shows that this result is robust. The policy implication is that a public labelling scheme should not be implemented as the demand and cost functions have low elasticities, implying that the welfare gain is low.     

Markets and welfare effects of food fraud

This study develops a theoretical framework of heterogeneous consumers and producers and imperfectly competitive food companies to analyse the system‐wide market and welfare effects of food fraud in the form of food adulteration and mislabelling. The results show that, while the price impacts of food fraud are product‐specific with the equilibrium prices of high‐quality and low‐quality products moving in different directions, the equilibrium quantities depend on the relative magnitude of the demand and supply effects of food fraud. Regarding the welfare effects of food fraud, they are shown to be highly asymmetric across different consumers and producers. In addition to enabling the disaggregation of the welfare effects of food fraud, the explicit consideration of agent heterogeneity, asymmetries in the probability of fraud detection and the endogeneity of the producer quality choices also enables the derivation of a key result of this study; contrary to what is traditionally believed, both low‐quality and high‐quality producers can have economic incentives to commit fraud. The group that is more likely to cheat is determined by the social attitudes towards fraudulent behaviour, the enforcement policy parameters and the relative magnitude of the demand and supply effects of food fraud. A comparison of the market effects of mislabelling and food adulteration reveals that, while the equilibrium quantity of the high‐quality product is higher in the presence of mislabelling, producers are more likely to mislabel than adulterate their products.     

城镇居民对林产品质量安全认知及影响因素研究——基于全国6省8市食用菌消费为例

对6省8市城镇消费者林下食用菌产品质量安全认知程度及影响因素进行了实证分析。城镇消费者对当前林产品质量安全认知水平不断提高,但林产品质量安全监管形势不容乐观;城镇消费者对食用菌产品质量安全的认知水平和认可程度主要与消费者性别、年龄、受教育程度与职业有关,且男性、受过良好教育、职业趋于稳定的城镇消费者对食用菌产品质量安全认知和认可程度比较高。     

Chinese animal product consumption in the 1990s

Chinese animal product consumption behaviour was analysed for both urban and rural households using a complete regional consumption dataset that was augmented to include away-from-home consumption. Seven animal product expenditure share equations were estimated with an extended Almost Ideal Demand System model. The results suggest that Chinese consumers will continue to increase their consumption of animal products, but that consumption patterns have changed in the 1990s. A large percentage of household animal product expenditure is still on pork. However, the shares for aquatic and poultry products consumption will increase substantially. As a consequence, the pork expenditure share will be gradually reduced as incomes grow and diet preferences change in both urban and rural households. There are significant differences in animal product consumption preferences across regions of China. As a result, studies that omit regional dummy variables in their demand systems can produce different expenditure and price parameters. The present paper also found that many of the estimates of elasticities and marginal expenditure shares would be rather different if the data ignored consumption away from home.     

Advertising Expenditures and the Consumption of Alcoholic Beverages

The theory of consumer behavior is applied to the estimation of a demand svstem. Monthly data on alcoholic beverages (beer, wine, liquor, soft dhnks) from the province of Ontario in Canada are analyzed. Before estimating the linear approximate almost ideal demand system (LA/AIDS), unit root and cointegration tests are implemented. Budget shares, per capita advertising expenditures, real total expenditure, prices and per capita consumption are found to be non-stationary. The budget share, the advertising expenditures, the prices and the real total expenditure are cointegrated for each beverage. Own and cross-price elasticities, income elasticities and own and cross-advertising elasticities are calculated from the estimated or the demand system. Based on own-price elasticities and income elasticities, alcohol consumption is consistent with the law of demand and the products analyzed are normal goods. The estimation of income and advertising effects is important for analyzing the need for, and the effectiveness of, potential control policies. The advertising elasticities are small but statistically significant. This suggests that advertising may promote alcoholic beverage consumption. The estimated inelastic demands for beer and wine suggest that the primary purpose of high excise taxes levied by the Federal and Provincial governments is to raise government revenues and not to discourage consumption.     

An Evaluation of Indian Government Rice Policy in Tamil Nadu

The Indian government procures rice from wholesalers or producers at a price below the market price and then distributes it to low-income consumers at a subsidized price. This paper uses a simulataneous equations econometric model to evaluate the effects of this policy on supply/demand of rice in the state of Tamil Nadu, between 1956 and 1985. Results show that production is more responsive to power for irrigation and fertilizer prices than to output prices. Because supply is inelastic, producers bear the burden of the ‘tax’ imposed by procurement even though rice is procured from the wholesaler. Rice distributed by the government displaces rice demanded in the open market, and thus the government distribution of rice has not increased the total consumption of rice.     

Label Style and Color Contribution to Explain Market Price Difference in Italian Red Wines Sold in the Chinese Wine Market

This study employs a hedonic price methodology to investigate the implicit price of individual labelling characteristics of Italian red wines sold in the Chinese market. Our results highlight the most important quality attributes (extrinsic and intrinsic) given in the label capable to explain price difference. In particular, reveal significant premium price for wine origin, identified in particular through the DOC/DOCG appellation given in the label, and for clean labels or labels with particular designs. On the contrary, a price discount has been revealed for Italian wines produced with local grape varieties and with a label characterised by warm colors. These results, partly in disagreement with other empirical evidence, contribute to enrich the existing literature in this field by providing useful suggestions both to the producers and other stakeholders operating in the wine industry.