The BBC and others have reported new research by the Prevention Research Center that looks at the links between price rises for alcohol, and changes in consumption. The research literature is rich with studies that show price increases are related to a net reduction in alcohol consumption, albeit the relationship is not simple (see for example the Pricing and Taxation chapter in Babor et al's Alcohol: no ordinary commodity ). Alcoholic beverages are not a homogenous entity; different types of products have different price elasticities; the impact of price increases varies according to consumer group (eg young people); the impact varies from country to country; and so on.
Researchers Gruenewald et al looked at the impact of price changes on alcohol sales in Sweden between 1984 and 1994, and found that price increases for cheaper drinks resulted in a much greater fall in sales than targetting expensive drinks. Consumers appear to switch between brands to compensate for price rises.
From the abstract (via this link): "The results of these analyses showed that consumers respond to price increases by altering their total consumption and by varying their brand choices. Significant reductions in sales were observed in response to price increases, but these effects were mitigated by significant substitutions between quality classes.
"The findings suggest that the net impacts of purposeful price policy to reduce consumption will depend upon how such policies affect the range of prices across beverage brands."
Unfortunately the BBC headline is rather misleading: Prices 'do not cut drinking', echoed elsewhere, for example see The Publican.
Ref: Gruenewald, P.J.; Ponicki, W.R.; Holder, H.D.; and Romelsjö, A. "Alcohol prices, beverage quality and the demand for alcohol: Quality substitutions and price elasticities," Alcoholism: Clinical and Experimental Research, November 21, 2005.
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