How Effective is Public Policy in Decreasing Soda Consumption? An Assessment of Four Policy Options

This paper examines the effectiveness of four policy options to decrease the consumption of carbonated soft drinks (CSDs). They are: (1) a soda tax (1 cent per ounce), (2) a ban on television advertising, (3) limiting calories to 100 per 12 oz volume; and (4) banning large containers such as the 2 lt. bottle. We apply the Berry, Levinsohn and Pakes (1995) demand model to data for 12 CSD brands in 3 container sizes over seven cities and 36 months to estimate consumers’ preferences for CSD. Limiting the size of containers (e.g., banning the 2 lt. bottle) was found to be the most effective policy option and a tax on calories was found to be the weakest in terms of effectiveness in decreasing the consumption of CSDs. The declines in the national consumption of CSDs were found to be approximately -6.3%, -15.4%, -15.5% and -15.8 for a tax, advertising ban, limiting calories, and restricting container sizes, respectively.