Estimates Of Price Elasticities Research Articles

Tax policy and tobacco consumption in Botswana: an ARDL-EC approach

PurposeBotswana imposed a 30% ad valorem tobacco tax in 2014 to reduce tobacco use. The purpose of the paper is to assess the effectiveness of the tax in curtailing tobacco consumption.Design/methodology/approachAn autoregressive distributed lag and equilibrium correction (ARDL-EC) framework is applied on data for the period 1975–2020 to estimate a dynamic tobacco demand model. The estimated price elasticity is then used to quantify the effects of the tax on tobacco consumption.FindingsA 10% rise in the tobacco price results in a 6.6% decrease in tobacco consumption, suggesting an inelastic response. A 10% rise in income yields a 12% increase in tobacco consumption, reflecting that the rapid economic growth Botswana experienced post-independence yielded increased tobacco use. Tobacco consumption declined by 3.6% per year, possibly capturing the effects of increasing awareness of the adverse effects of tobacco use over time. The 30% tobacco tax yielded a 20% reduction in tobacco consumption, suggesting moderate effectiveness in curtailing consumption. The tax reduced annual tobacco consumption by 100 grams per capita or 151 metric tons nationally.Research limitations/implicationsFuture research could explore the effects of non-price anti-tobacco measures and socioeconomic and demographic factors on tobacco use to provide further insights for guiding the development of targeted anti-smoking interventions.Originality/valueTobacco demand elasticities vary across countries and analytical methods. Therefore, country-specific empirical evidence is essential for policymaking. An existing study in Botswana employed cross-sectional analysis, which does not capture the addictive effects of tobacco. The ARDL-EC framework is employed to close this gap. Simulated effects of the tax are useful for policy reform in Botswana.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-01-2024-0097

Citrus greening, retail fruit prices, and household welfare: A demand system approach

Abstract Pests and diseases like citrus greening that threaten agricultural productivity also pose a risk to consumers. Reductions in food supply due to outbreaks and spread could increase food prices. We model U.S. household fruit demand using a Quadratic Almost Ideal Demand System and data from Circana’s 2020 and 2021 household panel. Price and income elasticity estimates reveal how household behavior might adjust with shocks to citrus and other fruit prices. Shocks to retail fruit prices can be from either citrus greening or other phenomena such as adverse weather. We also use compensating variation to estimate the impact that changes in fruit prices could have on consumer welfare.

National survey reveals elastic price sensitivity for select equine veterinary services.

The objective of this study was to estimate the price elasticity of demand for 3 common equine veterinary services: vaccinations (a routine service), lameness examinations (an elective service), and emergency colic surgery (an urgent service). Data were collected via a nationwide online survey of horse owners from August 15 to September 11, 2023, eliciting their willingness to pay for each service. The link to the online survey was distributed through participating organizations' social media and email lists to the target audience of US residents aged ≥ 18 years who were financially responsible for at least 1 horse, pony, mule, or donkey. Statistical software was used to estimate the demand models. The survey received a total of 4,915 usable responses, with at least one response from every state in the US. Results revealed elastic demand for all 3 services and subsample analyses provided reassurance as to the robustness of the results, suggesting that quantity demanded of these services would decrease more in a relative sense as compared to the increase in price. Understanding the current and future trends of equine veterinary service demand is vital in ensuring the long-term financial sustainability of equine veterinary practices. Moreover, due to vast differences in the pricing structure of small animal and equine practice procedures, business models for these types of practices should be treated separately. Although it may seem counterintuitive for practice growth, the estimated price elasticity of demand suggests that strategic price increases could enhance profitability. While higher prices may reduce service volume, they could also lead to lower costs, potentially offsetting any revenue reduction. Moreover, the findings on elastic demand can also inform decisions regarding discounts, service bundles, and the development of tiered service offerings.

Dynamic pricing and demand forecasting: Integrating time-series analysis, regression models, machine learning, and competitive analysis

Abstract. Dynamic pricing is a critical strategy for businesses seeking to optimize revenue and stay competitive in fluctuating markets. This paper explores the integration of various demand forecasting techniques, including time-series analysis, regression models, and machine learning algorithms, with competitive analysis methodologies to enhance dynamic pricing strategies. Time-series analysis focuses on decomposing data into trend, seasonality, and random fluctuations, using ARIMA models for accurate demand prediction. Regression models delve into the complexities of variable interactions, extending beyond linear relationships to include advanced techniques like Ridge, Lasso, and Elastic Net regression. Machine learning algorithms, such as decision trees, random forests, gradient boosting, and neural networks, revolutionize demand forecasting by uncovering complex patterns in large datasets. Competitive analysis incorporates market scanning, price elasticity estimation, and competitor behavior modeling to inform dynamic pricing decisions. Optimization algorithms, including linear programming, genetic algorithms, and simulated annealing, are employed to refine pricing strategies, while revenue management techniques like yield management and overbooking ensure maximum revenue from perishable goods and services. This comprehensive approach enables businesses to dynamically adjust prices in real-time, maintaining competitiveness and maximizing profitability in an ever-evolving market landscape.

Unraveling the effect of electricity price on electric vehicle charging behavior: A case study in Shenzhen, China

Estimating price elasticity of demand for electric vehicle charging contributes to the accurate determination of charging price, thereby improving electric vehicle adoption and energy sustainability. However, few studies have studied the impact of electricity price on electric vehicle charging behavior, especially the demand spillover effect caused by price fluctuations. To fill the gaps, on a citywide dataset of public charging piles in Shenzhen, China, first, correlation coefficients and hypothesis tests are used to determine the relationship between charging demand and price. A learning model incorporating two-layer graph attention, temporal pattern attention, and knowledge-embedded meta-learning is developed for accurate spatio-temporal regression. Impulse response analysis is conducted to unravel several noteworthy phenomena: (1) public charging demand is inelastic to electricity price, with an average elasticity of −0.76, and distinction between different functional areas and times is revealed; (2) negative price impulses marginally change the elasticity, while positive ones make electric vehicle charging users more price sensitive, and (3) the spillover effects caused by price increases and decreases bring 89.48% and 53.88% of its local demand changes to neighbors, respectively, with a scope of 3.45 kilometer. These findings provide policy implications for promoting electric vehicle charging to facilitate renewable energy transition.

Understanding the Residential Water Demand Response to Price Changes: Measuring Price Elasticity with Social Simulations

Water pricing is an economic instrument traditionally used to reduce water demand. However, its effective implementation requires knowledge of the extent to which users reduce water consumption with increasing water prices. The price elasticity of water demand has been estimated using econometric regression, which relies on cross-sectional and time-series water data. As an alternative, we propose the use of agent-based modelling, which does not require reliable historical data on water prices and consumption and enables the simulation of multiple scenarios with different consumer profiles, behaviour profiles and water price changes, thereby allowing comprehensive understanding of price elasticity estimates. To illustrate the potential use of agent-based modelling for the estimation of water demand price elasticity, we performed an empirical application to a residential area in Chile. Price elasticity estimates ranged from −0.0159 to −0.1036 (mean −0.0250), indicating that residential water consumption is inelastic to price changes. This result is consistent with previous findings. Agent-based modelling is an alternative for the ex-ante assessment of the potential effectiveness of water pricing policies intended to reduce residential water demand.

Nutritional implications of substituting plant-based proteins for meat: evidence from home scan data

There is growing concern among policymakers and researchers about the negative health and climate impacts of meat consumption. Consumers are encouraged to re-evaluate their dietary choices to preserve our ecosystem and reduce the burden of diet-related diseases. However, limited information is available about how price changes in animal protein sources affect plant-based protein demand and the consequences for nutrient intake and/or diet quality. The goal of the present paper is to fill this gap by explaining how consumers react to price changes in animal protein types and to present the implications for nutrition or diet quality. This paper applied the exact affine stone index implicit (EASI) Marshallian demand system to 2021 home scan panel data collated by the Kantar Worldpanel to estimate both price and expenditure elasticities. Twelve food groups of seven animal-based protein products and five plant-based protein products were considered. The results revealed that dairy and eggs are daily necessities for the people of Scotland. The demand for fish and non-dairy milk are the most sensitive to price. Estimates based on expenditure elasticities show that beef is considered a luxury and a highly substitutable product in the Scottish diet. Peas are relatively basic, essential foodstuffs. In general, increasing the price of animal protein sources will shift demand towards plant protein. On the positive side, there will be a significant reduction in cholesterol and fat purchases. However, there would also be a significant reduction in the total amount of protein, carbohydrates, and healthy fats, such as unsaturated fatty acids, purchased by the average household. This shows that increases in plant-based protein are not enough to compensate for the reductions in essential macro- and micronutrient purchases from animal protein. From the climate perspective, reductions in meat purchases could reduce emissions from production and consumption.

Estimating price elasticities of demand for pain relief drugs: evidence from Medicare Part D.

Overdose deaths from prescription opioids remain elevated, and policymakers seek solutions to curb opioid misuse. Recent proposals call for price-based solutions, such as opioid taxes and removal of opioids from insurance formularies. However, there is limited evidence on how opioid consumption responds to price stimuli. This study addresses that gap by estimating the effects of prices on the utilization of opioids, as well as other prescription painkillers. I use nationally representative individual-level data on prescription drug purchases and exploit the introduction of Medicare Part D in 2006 as an exogenous change in out-of-pocket drug prices. I find that new users have a relatively high price elasticity of demand for prescription opioids, and that consumers treat over-the-counter painkillers as substitutes for prescription painkillers. My results suggest that increasing out-of-pocket prices of opioids, through formulary design or taxes, may be effective in reducing new opioid use.

The demand for sparkling wine: insights on a diversified European market

PurposeThe article aims to study the demand for sparkling wines in Europe. The main objective is to estimate the classic demand parameters aggregately for the entire European area (European Union and the United Kingdom) and separately for groups of countries characterized by wine markets with similar characteristics.Design/methodology/approachUsing 15-years market data for different wine categories from the Euromonitor Passport database, the estimation of price and income elasticities is performed through a Quadratic Almost Ideal Demand System. In line with the objectives, the model is applied first to the whole European area and then separately to the considered groups of countries (subareas). To identify homogeneous subareas, a cluster analysis was performed on basic characteristics of the wine market.FindingsWhen considering the European market as a whole, sparkling wines should be considered a luxury category with a high own-price elasticity. However, the structure of their demand is rather different in different sub-areas. The observed heterogeneity suggests that differentiated policy and marketing considerations should be made. In addition, it widens the possibilities for producers, who can choose the submarkets that respond best to their needs to export their sparkling wines. This seems particularly important in markets, like the sparkling wine ones, that are experiencing a continuous expansion over the last decades.Originality/valueDespite using a methodology well-established to study wine and alcohol demand, the study fills a considerable gap in the literature. Although the demand for sparkling wine is growing worldwide, so far only a couple of studies have engaged in the analysis of its structure. In Europe, the largest market for sparkling wine, this kind of studies is completely lacking.

Estimating own-price and cross-price elasticity of cigarette consumption by price tiers in Bangladesh

ObjectivesThe overall price elasticity of cigarette consumption in Bangladesh has been studied extensively. The estimates of price elasticity by price tiers are not available in the existing literature.MethodsUsing cohort data...

Effects of the illicit market on the price elasticity of cigarette consumption in Brazil

BackgroundAn important element to consider in tobacco tax policy is the illicit market of cigarette sales. The objective of this paper is to provide estimates of both conditional and unconditional...

Price effects of residents' consumption carbon emissions: Evidence from rural and urban China

Price policy applied to specific products may mitigate consumption carbon emissions (CCE). Nevertheless, the extent to which price effects, such as carbon taxes, differ across income groups and between rural and urban areas in China remains uncertain. With unbalanced provincial panel data from 1999 to 2020, we estimated the demand elasticities of eight major groups of consumer goods and services across income groups separately in rural and urban areas of China, using the Quadratic Almost Ideal Demand System (QUAIDS) and the Exact Affine Stone Index Implicit Marshallian demand system (EASI) in this study. The estimated price elasticities were then used to predict the impact of different price policies on CCE. The results show that taxing the wealthiest individuals and subsidizing the poorest individuals in both rural and urban areas have a beneficial impact on the reduction in CCE. Moreover, expanding transfer payments can further facilitate reductions in CCE. Our findings suggest that achieving CCE equality can be realized through intra-urban and intra-rural transfers, as well as urban-rural transfers achieved by taxing urban residents and subsidizing rural residents.

Estimating price elasticity of demand for mineral commodities used in Lithium-ion batteries in the face of surging demand

The accelerating adoption of clean energy technologies is driving demand for certain mineral commodities like lithium, essential for electric vehicle batteries. Understanding the influence of the energy transition on each market requires examining their supply and demand price elasticities. However, there have only been a limited number of studies that have estimated mineral demand price elasticities in emerging technologies. We empirically estimate the price elasticity demand (PEDs) for mineral commodities used in lithium-ion battery cathodes and anodes—cobalt, graphite, lithium, manganese, and nickel. We also test whether the price elasticities of these mineral commodities have changed due to any structural changes in recent years, given the recent expansion in the sales of electric vehicles. Using Two Stage Least Squared (2SLS) econometric techniques, we find that demand has become less elastic for lithium (-0.11), cobalt (-0.45), nickel (-0.09), and manganese (-0.04) after structural breaks in 2020, 2013, 2009, and 2014, respectively. In contrast, demand for natural amorphous graphite (-0.36), and natural flake graphite (-0.58) remains relatively stable over the time period assessed.

Own price elasticities of the demand for sugar-sweetened beverages in Bangladesh

BackgroundConsumption of sugar-sweetened beverages (SSB) is a major global public health problem. Increasing the price of SSBs through taxation is an effective tool to reduce SSB consumption. Price-elasticity estimates are useful in measuring the effect of taxation on consumption. We estimated the own price elasticities of demand for SSBs in Bangladesh, which will inform how SSB taxes could affect behaviour.MethodsWe used Household Income and Expenditure Survey (HIES) 2016 data, which is a nationally representative dataset at the household level across the country and is conducted using stratified random sampling method. Deaton’s method was used to estimate the price elasticities for SSBs in Bangladesh.ResultsWe found that the own price elasticity for SSBs varied between − 0.53% to -1.17% by types of SSBs in Bangladesh. The price elasticity for soft drinks was − 1.17, indicating that if the price of soft drinks increases by 10% via taxes, the quantity consumed of these beverages would reduce by 11.7%.ConclusionThis is the first study that estimates the own price elasticities of demand for SSBs in Bangladesh. Our results suggest to raise SSB prices through increased taxation in order to reduce SSB consumption and ensure public health gains in Bangladesh.

Understanding the dynamics of dining out food waste: exploring the price effect and heterogeneities

ABSTRACT Dining out food waste has garnered considerable global attention in recent years. This study empirically analyses the impact of food prices on dining out food waste based on a comprehensive micro-survey conducted in China’s restaurants. The primary findings reveal a significant and negative effect of food prices on dining out food waste, largely attributed to a considerable decrease in food ordering quantity and an increased likelihood of packing leftovers. The heterogeneity analyses further underscore the nuanced influence of price intervention, suggesting that strategies targeting high-price restaurants may yield more effective outcomes. Additionally, concerns about potential unintended consequences, such as overeating or obesity, are alleviated by empirical evidence demonstrating that food prices do not significantly affect the quantity of food consumption. However, the estimated price elasticity at the sample mean is inelastic (−0.18), suggesting a potentially substantial welfare loss consumers would face without considering the value of food waste-related externalities. Moreover, the small marginal effect of price also raises doubts about the effectiveness of the food waste disposal fee of restaurants in China.

Evaluation of a carbon tax in Costa Rica linking a demand system focused on energy goods and an input-output model

This study evaluates the impact of a carbon tax on CO2 emissions in Costa Rica. For the above, a demand system is estimated using data from a household expenditure survey, which allows for obtaining the elasticities of demand for various groups of goods focused on energy. Then, the environmental extension of the Leontief price model is implemented to determine the change in prices caused by different carbon tax rates (25, 50, 75, and 100 USD/ton CO2). Subsequently, both models are linked to obtain the variations in production and sectoral emissions. In addition, a Monte Carlo simulation is carried out since the estimated price elasticities have a standard deviation associated with them. The results suggest that carbon taxes mainly affect transportation, while the rest of the sectors have slight impacts in all simulated scenarios. For example, the drop in total CO2 emissions is explained between 89.6% and 91.3% by the decrease in emissions in the passenger transport and other transport sectors with a 95% confidence interval. The previous is explained by the composition of Costa Rica's energy matrix, which has a very high share of renewable energies. Finally, some climate policy options are suggested to contribute to this country's carbon neutrality.

Inflation and distributional impacts: Have mitigation policies been successful for vulnerable and energy poor households?

The aim of this paper is to assess the distributional impact of the 2021–23 price increase on Italian household expenditure and energy poverty. Using the microsimulation model developed by the Italian Parliamentary Budget Office, the analysis provides a comprehensive assessment of the uneven impact of inflation across the population and measures how mitigation policies have compensated for this impact. In particular, we focus on vulnerable households to examine whether energy poverty has been affected by the rise in energy prices and to what extent policies have succeeded in protecting these families. Our main findings show that in 2022, mitigation policies have stabilised the impact of inflation by compensating households for almost half of the effect of the price shock on their expenditure. Although not particularly well targeted at energy-poor households, the mitigation policies have protected households from a worsening of their energy vulnerability. However, the reduction of support measures adopted in 2023 is expected to increase the area of vulnerability, including households that are particularly sensitive to high energy costs. Finally, the behavioural response of households was also considered by estimating price elasticities of energy demand and measuring their impact on the simulated scenarios using a sensitivity approach.

Food for thought: A meta-analysis of animal food demand elasticities across world regions

Animal food products are featured prominently in current debates on dietary transitions. Food demand projections and policy evaluations often draw on expenditure and price elasticity estimates; thus, it is crucial that these elasticities are robust at an adequate product disaggregation, well-founded, and comparable both across products and countries. To the extent of our knowledge, there is no analysis providing meta-elasticities for all world regions, all food groups, and disaggregated animal foods. In this study, we cover this gap and collect a database with more than 50,000 demand elasticities from 444 studies and 87 countries. As 50% of our sample involves animal food products, we are able to provide food demand meta-elasticities for 14 food groups, of which ten are animal food. We present a set of estimated expenditure, own-price, and cross-price; unconditional and conditional; and uncompensated and compensated elasticities; and discuss their policy implications.

Tobacco price elasticity by socioeconomic characteristics in Ecuador.

Smoking is a worldwide epidemic and increased prices are one of the most cost-effective measures to reduce tobacco consumption. This article aims to estimate the price and income elasticity of cigarettes for different population groups in Ecuador. The National Survey of Urban and Rural Household Income and Expenditures (ENIGHUR) 2011-2012 was used, which has information on household cigarette consumption and its sociodemographic characteristics. Deaton's Almost Ideal Demand System, which decouples the effect of quality on the price of the good, was applied. The elasticities were calculated for several groups: urban/rural, income levels (tertiles), education level, sex and age ranges of the household head, and frequency of cigarette purchases in households. The estimated price elasticity nationwide is -0.89 and the income elasticity is 0.41, both statistically significant. Households headed by women (-2.22) are more sensitive to an increase in cigarette prices than those headed by men (-0.65) and households headed by people between 20 and 40 years of age (-2.32) have a higher price elasticity compared to country-level estimations. Differences within other groups are not statistically significant.

Taxing sugar sweetened beverages in Indonesia: Projections of demand change and fiscal revenue.

The global trend of diets high in sugar sweetened beverages (SSB) is associated with a high risk of obesity and non-communicable diseases (NCDs). To reduce SSB consumption on a population level, SSB taxes have become a popular policy solution. In Indonesia, although the prevalence of obesity has doubled in the past decade (11.7% in 2010 to 21.8% in 2018), SSB taxes have not yet been implemented. Utilizing the 2021 Indonesian household socioeconomic survey (SUSENAS), this study estimated price elasticities and projected the plausible effects of implementing an SSB tax on consumers' demand for SSBs and the associated government revenue using the Quadratic Almost Ideal Demand System (QUAIDS) model. Five SSB groups were studied: 1) manufactured liquid milk; 2) sweetened condense milk; 3) instant coffee; 4) tea drinks and fizzy drinks with CO2; 5) fruit juices, "health" drinks, and energy drinks. The overall results showed that the non-milk SSB groups were price elastic. Probing deeper into the substitutions for SSB across categories, we found both substitutionary and complementary effects. Our analysis revealed that increasing SSB prices by 20% would reduce the demand for SSBs on average by 17.5% (14.3%-18.6% for each SSB group) and generate additional state revenue up to IDR 3,628.3 billion per year (approximately US$ 238.5 million or 0.2% of total tax revenue in 2022). Considering the health and economic impacts of high consumption of SSBs, this study provides empirical evidence that imposing taxes on SSBs could be an effective measure to reduce public consumption and to generate tax revenue for financing health programs that address obesity and NCDs in Indonesia.