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Home
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Working Papers
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Do Consumers Exploit Precommitment Opportunities? Evidence from Natural Experiments Involving Liquor Consumption

Working Paper No. 101

Published: 2012
Category:
Economics

Do Consumers Exploit Precommitment Opportunities? Evidence from Natural Experiments Involving Liquor Consumption

B. Douglas Bernheim, Jonathan Meer & Neva K. Novarro
Full Text PDF
Abstract
The object of this paper is to provide evidence concerning the extent to which consumers of liquor exhibit a demand for precommitment devices. One of the most frequently mentioned strategies for exercising self-control is to limit the availability of a problematic good by not maintaining an easily accessed supply. In a policy regime with shorter sales hours (either for on- premise or off-premise consumption), this strategy should be more effective; hence, if the strate- gy is widely used, alcohol consumption should be lower. In contrast, without time inconsistency, one would expect liquor consumption to decline with shorter on-premise sales hours (because of complementarities between liquor and other on-premise activities such as dining and socializ- ing), but not necessarily with shorter off-premise sales hours (because liquor is storable at low cost and the experience is repeated with high frequency). We examine a collection of natural ex- periments in which states expanded allowable Sunday sales hours for liquor. Our results indicate that consumers increase their liquor consumption in response to extended Sunday on-premise sales hours, but not in response to extended off-premise sales hours. Thus we find no indication that precommitment strategies affecting availability play meaningful roles in aggregate liquor consumption. Instead, the observed pattern coincides with predictions for time-consistent con- sumers who have rational expectations and low costs of carrying inventories.

Submission

Please send your papers as PDF files to the editor, Victor Ginsburgh, at vginsbur@ulb.ac.be
Papers will be quickly reviewed, prior to potential posting on the website. Decision will be to post or not, possibly with short comments, but without referee reports. The decision will be based primarily on the suitability of the paper’s topic to the aims of the Association.
Such decisions are independent of publication decisions for the Journal of Wine Economics.

Working Paper publication requires that at least one author
is a regular member of AAWE.

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