Advertising Bans, Monopoly, and Alcohol Demand: Testing for Substitution Effects using State Panel Data

Advertising Bans, Monopoly, and Alcohol Demand: Testing for Substitution Effects using State... Using a panel of 45 states for the period 1982–1997,this study analyzes the importance of severalrestrictive alcohol regulations, including advertising bans for billboards, bans of price advertising, state monopoly control of retail stores, and changes in the minimum legal drinking age. In contrast to previous research, the study allows for substitution among beverages as a response to a regulation that targets a specific beverage. A restrictive law that applies only to one beverage (or one form of advertising) can result in substitution toward other beverages (or non-banned media). Allowing for substitution means that the net effect on total alcohol consumption is uncertain, and must be determined empirically. The empirical results demonstrate that monopoly control of spirits reduces consumption of that beverage, and increases consumption of wine. The effect on beer is positive, but is not statistically significant. The net effect on total alcohol is significantly negative. Higher minimum legal drinking age laws have negative effects on beverage and total alcohol consumption. Bans of advertising do not reduce total alcohol consumption, which partly reflects substitution effects. The study thus demonstrates the possible unintended consequences of restrictive alcohol regulations. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Advertising Bans, Monopoly, and Alcohol Demand: Testing for Substitution Effects using State Panel Data

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2003 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1022184014407
Publisher site
See Article on Publisher Site

Abstract

Using a panel of 45 states for the period 1982–1997,this study analyzes the importance of severalrestrictive alcohol regulations, including advertising bans for billboards, bans of price advertising, state monopoly control of retail stores, and changes in the minimum legal drinking age. In contrast to previous research, the study allows for substitution among beverages as a response to a regulation that targets a specific beverage. A restrictive law that applies only to one beverage (or one form of advertising) can result in substitution toward other beverages (or non-banned media). Allowing for substitution means that the net effect on total alcohol consumption is uncertain, and must be determined empirically. The empirical results demonstrate that monopoly control of spirits reduces consumption of that beverage, and increases consumption of wine. The effect on beer is positive, but is not statistically significant. The net effect on total alcohol is significantly negative. Higher minimum legal drinking age laws have negative effects on beverage and total alcohol consumption. Bans of advertising do not reduce total alcohol consumption, which partly reflects substitution effects. The study thus demonstrates the possible unintended consequences of restrictive alcohol regulations.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 4, 2004

References

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