The implications of heterogeneous habit in consumer beverage purchases on soda and sin taxes |
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| Institution: | 1. Department of Health Policy and Management, Gillings School of Global Public Health, the University of North Carolina at Chapel Hill, NC, United States;2. Carolina Population Center and Department of Nutrition, Gillings School of Global Public Health, the University of North Carolina at Chapel Hill, NC, United States;1. Institute for Health Research and Policy, School of Public Health, University of Chicago at Illinois, 1747 West Roosevelt Road, Room 558, Chicago, IL 60608-1264, United States;2. College of Pharmacy & Yonsei Institute for Pharmaceutical Research, Yonsei University, Incheon, South Korea;3. Health Policy and Administration, School of Public Health, University of Illinois at Chicago, United States;1. Shepherd University, P.O. Box 5000, Shepherdstown, WV 25443, United States;2. The Pennsylvania State University, 112 Armsby, University Park, PA 16802, United States;1. DIW Berlin, Mohrenstrasse 58, 10117 Berlin, Germany;2. Freie Universität Berlin, Garystr. 21, 14195 Berlin, Germany;3. University of Copenhagen, Rolighedsvej 23, 1958, Frederiksberg, Denmark |
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| Abstract: | In this article, we study the heterogeneity of habit strength in households’ demand for regular carbonated sweetened beverages (CSBs) and beer in the United States. A demand model that nests a smooth transition function is used to describe habit-based consumption patterns, revealing heterogeneous strengths of habits among households. We find that more habitual consumers, those with a strong preference for a particular product, are not as sensitive to price or expenditure as the aggregate population. This finding is further supported by simulations of the potential effects of soda and beer taxes. We find the aggregate response to soda and beer taxes is smaller than when the influence of habit is assumed to be homogeneous. |
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| Keywords: | Heterogeneity Habit strength Sin tax Soda tax Smooth transition |
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