Analysis of demand for on-trade and off-trade alcoholic beverages in the Czech Republic
| Author: | Bc. Tereza Čiderová |
|---|---|
| Year: | 2022 - summer |
| Leaders: | Mgr. Milan Ščasný PhD. |
| Consultants: | |
| Work type: | Bachelors |
| Language: | English |
| Pages: | 84 |
| Awards and prizes: | |
| Link: | https://dspace.cuni.cz/handle/20.500.11956/173504 |
| Abstract: | The majority of the previous research examined the demand for alcohol consumed off-trade. However, some consumers might prefer to consume on-trade alcohol or switch between on-trade and off-trade consumption as a reaction to price or income change. Therefore, we constructed a behavioral model which considers beer, wine, and spirits consumed at home and away from home as six separate goods. Firstly, we derived unit prices calculated as a ratio of expenditure and quantity consumed, imputed unit prices for non-consumers and then adjusted them for the quality. Secondly, we estimated probit regressions explaining consumption probabilities following Heien and Wessels’s approach to deal with the censoring in our data. Lastly, we estimated the Quadratic Almost Ideal Demand System to derive own-price, cross-price, and income elasticities. Consumption of beer was found to be the most responsive to income changes, whilst spirits are the least responsive, and on-trade income elasticities are always higher than their off-trade counterparts. Our results suggest that compensated own-price elasticities of demand range between -0.90 and -0.40 at the off-trade and between -1.36 and -0.53 at the on-trade alcohol market. On-trade alcoholic beverages were found to be mutual complements, implying that increase in the price of one results in a decrease in overall demand for alcohol consumed away from home. Lastly, off-trade beer’s unique place in the Czech alcohol market has been supported by its positive cross-price elasticities with respect to all remaining beverages consumed at home or away from home, implying that consumers mostly react to increases in prices of alcohol by switching to at-home beer consumption. Data used in our analysis originate from the Czech Household Budget Survey |
