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It might be your last point is the most significant, this is a psychological effect, not economic. From my basic understanding, economics often assumes rational

by altacc 5y ago

It might be your last point is the most significant, this is a psychological effect, not economic. From my basic understanding, economics often assumes rational actors, but humans are not always rational. Maybe those willing to pay more will get used to the new, higher price but what changes their actions is the implicit warning of "Hey, this has loads of sugar!". There might be a parallel here with cigarette sales, where both price rises and displaying warnings on packets were used to encourage people to quit.

logicallee 5y ago
Thanks for reading! >Maybe those willing to pay more will get used to the new, higher price but what changes their actions is the implicit warning of "Hey, this has loads of sugar!". It would be cool to test that effect by itself! Since retailers set their prices, it is possible to run a controlled experiment like I showed - where the left side has sugar, the right side is the sugar-free version (not subject to taxes): https://ibb.co/hXmGt9F https://ibb.co/hXmGt9F (The two rows are meant to represent two different vending machines, I didn't mark it super clearly.) In the test group (bottom row) you would include "Includes SF Sugary Drink Tax" but in the control group (top row) you do not include that label: this would isolate the effect of the label! (In effect, on the top row you just reduce your profit as the point of sale merchant, without telling the customer about it.) What do you think the effect would be? Same sales in top row (control group) and bottom row (test group) or, do you agree with the authors that telling the customers about the effect is the thing that causes it? (In that case the bottom row would have much lower sales than the top row.) I predict that the sales would be similar between the test and control group in the experiment I suggest (after all it is the same product at the same price!) but I don't know for sure.
- altacc 5y ago
  I think I've worked on customer facing products enough to know never to assume customer actions and especially not to assume they're rational! Price factors are unimportant to some people and even if it is an important factor, adding a secondary decisions factor, the sugar content, substantially alters the decision being made. This study seems too small to prove a difference but a interesting pointer for more research about how to improve the effectiveness of a sugar tax. I prefer it when policy decisions are evidence based.

by altacc 5y ago

logicallee 5y ago

Thanks for reading! >Maybe those willing to pay more will get used to the new, higher price but what changes their actions is the implicit warning of "Hey, this has loads of sugar!". It would be cool to test that effect by itself! Since retailers set their prices, it is possible to run a controlled experiment like I showed - where the left side has sugar, the right side is the sugar-free version (not subject to taxes): https://ibb.co/hXmGt9F https://ibb.co/hXmGt9F (The two rows are meant to represent two different vending machines, I didn't mark it super clearly.) In the test group (bottom row) you would include "Includes SF Sugary Drink Tax" but in the control group (top row) you do not include that label: this would isolate the effect of the label! (In effect, on the top row you just reduce your profit as the point of sale merchant, without telling the customer about it.) What do you think the effect would be? Same sales in top row (control group) and bottom row (test group) or, do you agree with the authors that telling the customers about the effect is the thing that causes it? (In that case the bottom row would have much lower sales than the top row.) I predict that the sales would be similar between the test and control group in the experiment I suggest (after all it is the same product at the same price!) but I don't know for sure.

altacc 5y ago
I think I've worked on customer facing products enough to know never to assume customer actions and especially not to assume they're rational! Price factors are unimportant to some people and even if it is an important factor, adding a secondary decisions factor, the sugar content, substantially alters the decision being made. This study seems too small to prove a difference but a interesting pointer for more research about how to improve the effectiveness of a sugar tax. I prefer it when policy decisions are evidence based.