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Estimating consumer preferences for different beverages using the BLP approach.

Catherine Haeck1, Nicholas Lawson1, Krystel Poirier1

  • 1Département de sciences économiques, Université du Québec á Montréal, 315 Rue Sainte-Catherine E, Montréal H2X 3X2, Québec, Canada.

Economics and Human Biology
|April 22, 2022
PubMed
Summary
This summary is machine-generated.

Taxing sugar-sweetened beverages (SSBs) in Quebec could significantly reduce consumption. Energy drink consumers are most responsive to price changes, while soft drink consumers are least responsive.

Keywords:
BLPPrice elasticity of demandSugar-sweetened beveragesTaxation

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Area of Science:

  • Health Economics
  • Consumer Behavior Analysis
  • Public Health Policy

Background:

  • Overconsumption of sugar poses a significant public health challenge.
  • Taxation of sugar-sweetened beverages (SSBs) is a potential policy intervention.
  • Understanding consumer preferences and price sensitivity is crucial for effective SSB taxation.

Purpose of the Study:

  • To estimate the price elasticity of demand for various beverages in Quebec.
  • To inform the optimal implementation of SSB taxes.

Main Methods:

  • Utilized the Berry, Levinsohn, and Pakes (BLP) random parameter logistic demand model.
  • Employed Nielsen data (2010-2016) and the 2016 Canadian Census.
  • Analyzed consumer preferences and price sensitivity for different beverage categories.

Main Results:

  • Average consumers show a preference for high-calorie beverages, including those with fruits and vegetables.
  • Estimated price elasticities of demand ranged from -4.40 for energy drinks to -1.59 for regular soft drinks.
  • Energy drink consumers exhibited the highest reduction in consumption with price increases, while soft drink consumers showed the least.

Conclusions:

  • An SSB tax in Quebec is projected to lead to a substantial decrease in overall consumption.
  • The findings provide valuable insights for policymakers considering SSB taxation strategies.
  • Differential price elasticities highlight varying consumer responses to potential tax-induced price hikes.