The neuroeconomic model predicts that an increase in an individual's addictive stock will increase their responsiveness to external cues such as advertising and decrease their responsiveness to objective information such as price. Since most alcohol consumers are moderate drinkers, alcohol control policy ideally should be targeted at alcohol abusers. However, restrictions on advertising and outlet density have been generally secondary to increases in excise taxes. A likely reason for this is the relatively limited number of studies which show that advertising and outlet density controls are effective in contrast to the relatively large number of studies which show that excise taxes are effective. Part of the reason for these weak results is that many prior studies of the effect of advertising and outlet density have used dubious methodologies and none have controlled for addictive stock. However, a number of studies of price have controlled for addictive stock by estimating price effects specifically for heavy drinkers. These studies have shown that heavy drinkers are less responsive to price increases than are moderate drinkers which are consistent with the predictions of the neuroeconomic model. This project will build on methodological advances of prior studies of alcohol advertising and advance the methodology with the use of panel data with individual fixed effects and by controlling for addictive stock. It is expected that the results from this study will help to reconcile the differences from prior studies of advertising and outlet density.
The results of this study will be important in assessing the relative value of alternative public policies designed to reduce alcohol abuse. These policies include restrictions on alcohol advertising, alcohol outlet density and alcohol taxes. It is important to understand which of these policies are more likely to reduce alcohol abuse since the alcohol industry is likely to oppose any changes which it believes will reduce sales.