A Behavioral Economic Model of Alcohol Advertising and Price

This paper presents a new empirical study of the effects of televised alcohol advertising and alcohol price on alcohol consumption. A novel feature of this study is that the empirical work is guided by insights from behavioral economic theory. Unlike the theory used in most prior studies, this theory predicts that restriction on alcohol advertising on TV would be more effective in reducing consumption for individuals with high consumption levels but less effective for individuals with low consumption levels. The estimation work employs data from the National Longitudinal Survey of Youth, and the empirical model is estimated with quantile regressions. The results show that advertising has a small positive effect on consumption and that this effect is relatively larger at high consumption levels. The continuing importance of alcohol taxes is also supported. Education is employed as a proxy for self-regulation, and the results are consistent with this assumption. The key conclusion is that restrictions on alcohol advertising on TV would have a small negative effect on drinking, and this effect would be larger for heavy drinkers. Copyright © 2015 John Wiley & Sons, Ltd.