Time inconsistency and alcohol sales restrictions

Hinnosaar, Marit

Abstract

Restrictions on alcohol sales hours or days are commonly used tools in order to reduce alcohol consumption. However, a forward-looking consumer can buy in advance, and thereby mostly undo the impact of the restriction. I study whether time inconsistent consumer preferences can provide a justification for restrictions on alcohol sales time. I estimate a demand model, which allows a fraction of consumers to be time inconsistent, using scanner data of beer purchases and other shopping behavior. According to the estimation results, 16% of regular beer buyers, or only 3% of all consumers, behave as if they are time inconsistent. I find that in terms of consumer welfare, the sales restriction may be welfare improving, but is worse than increasing taxes.

Citation

Hinnosaar, M. (2016). Time inconsistency and alcohol sales restrictions. European Economic Review, 87, 108-131. https://doi.org/10.1016/j.euroecorev.2016.04.012

• Journal Article Type: Article
• Acceptance Date: Apr 28, 2016
• Online Publication Date: May 12, 2016
• Publication Date: 2016-08
• Deposit Date: Aug 25, 2021
• Publicly Available Date: Aug 25, 2021
• Journal: European Economic Review
• Print ISSN: 0014-2921
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 87
• Pages: 108-131
• DOI: https://doi.org/10.1016/j.euroecorev.2016.04.012
• Public URL: https://nottingham-repository.worktribe.com/output/5155509
• Publisher URL: https://www.sciencedirect.com/science/article/abs/pii/S0014292116300836