Please cite this article in press as: Jiang, H., et al., Price elasticity of on- and off-premises demand for alcoholic drinks: A Tobit analysis. Drug Alcohol Depend. (2016), http://dx.doi.org/10.1016/j.drugalcdep.2016.04.026 ARTICLE IN PRESS G Model DAD-6025; No. of Pages 7 Drug and Alcohol Dependence xxx (2016) xxx–xxx Contents lists available at ScienceDirect Drug and Alcohol Dependence j ourna l h o me pa ge: www.elsevier.com/locate/drugalcdep Full length article Price elasticity of on- and off-premises demand for alcoholic drinks: A Tobit analysis Heng Jiang a,* , Michael Livingston a , Robin Room a,b , Sarah Callinan a a Centre for Alcohol Policy Research, School of Psychology and Public Health, La Trobe University, Melbourne, Victoria, Australia b Centre for Social Research on Alcohol and Drugs, Stockholm University, Stockholm, Sweden a r t i c l e i n f o Article history: Received 23 December 2015 Received in revised form 6 April 2016 Accepted 19 April 2016 Available online xxx Keywords: Alcohol demand Elasticities Price policy Tobit model a b s t r a c t Background: Understanding how price policies will affect alcohol consumption requires estimates of the impact of price on consumption among different types of drinkers and across different consumption settings. This study aims to estimate how changes in price could affect alcohol demand across differ- ent beverages, different settings (on-premise, e.g., bars, restaurants and off-premise, e.g., liquor stores, supermarkets), and different levels of drinking and income. Methods: Tobit analysis is employed to estimate own- and cross-price elasticities of alcohol demand among 11 subcategories of beverage based on beverage type and on- or off-premise supply, using cross- sectional data from the Australian arm of the International Alcohol Control Survey 2013. Further elasticity estimates were derived for sub-groups of drinkers based on their drinking and income levels. Results: The results suggest that demand for nearly every subcategory of alcohol significantly responds to its own price change, except for on-premise spirits and ready-to-drink spirits. The estimated demand for off-premise beverages is more strongly affected by own price changes than the same beverages in on-premise settings. Demand for off-premise regular beer and off-premise cask wine is more price responsive than demand for other beverages. Harmful drinkers and lower income groups appear more price responsive than moderate drinkers and higher income groups. Conclusion: Our findings suggest that alcohol price policies, such as increasing alcohol taxes or introducing a minimum unit price, can reduce alcohol demand. Price appears to be particularly effective for reducing consumption and as well as alcohol-related harm among harmful drinkers and lower income drinkers. © 2016 Elsevier Ireland Ltd. All rights reserved. 1. Introduction Excessive alcohol consumption is an important cause of social and health harms (Babor et al., 2010). There is strong evidence that price-based interventions, such as increasing alcohol taxa- tion, banning alcohol promotions, or introducing a minimum unit price, would be effective approaches to reduce the level of alcohol consumption and related health and social problems in a society (Anderson et al., 2009). However, to determine the most effective approach to alcohol pricing interventions, good estimates of price elasticity are needed. * Corresponding author at: Centre for Alcohol Policy Research, School of Psychol- ogy and Public Health, La Trobe University; 215 Franklin St, Melbourne, VIC 3000, Australia. E-mail address: jason.jiang@latrobe.edu.au (H. Jiang). The price elasticity of demand, a ratio of percentage changes in demand of a product given a price change, has been widely dis- cussed in many previous studies for a range of goods and services. Based on the results of more than 100 studies in over 25 countries, three meta-analyses found that the mean overall price elasticity of alcohol demand is about -0.5 (Gallet, 2007; Wagenaar et al., 2009; Fogarty, 2010). Importantly, this overall elasticity provides little information on how pricing policies will affect particular drinkers or beverage categories. Recent studies have focused on the estima- tion of elasticities for different beverage types and different trade sectors for alcohol price policy appraisal (Doran et al., 2013; Holmes et al., 2014; Meng et al., 2014; Srivastava et al., 2014), highlight- ing the important differences in price effects across the alcohol market. Elasticities vary across different categories depending on consumers’ preferences, and are also affected by the different exist- ing taxes and prices for different beverage types. A consumer’s response to price may also be expected to vary by whether the beverage is purchased for on-premise or off- http://dx.doi.org/10.1016/j.drugalcdep.2016.04.026 0376-8716/© 2016 Elsevier Ireland Ltd. All rights reserved.