AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

AAWE Working Paper No. 101 – Economics

 

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

B. Douglas Bernheim, Jonathan Meer and Neva K. Novarro 

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.

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