The finding that drinking by young adults can be considered an addictive behavior has important implications for the effects of price on alcohol consumption. For example, when Grossman and colleagues (1998) used models that ignored the addictive aspects of alcohol consumption to analyze their data, they estimated an average price elasticity of alcohol demand of −0.29. When they used the model accounting for the addictive nature of alcohol, however, the estimated average long-term price elasticity of demand was more than twice as high at −0.65, indicating that price had a much greater influence on alcohol consumption. Moreover, the estimate of the long-term price elasticity of demand was approximately 60 percent higher than the estimate of the short-term elasticity (which, in turn, was almost 40 percent higher than the average estimate derived using nonaddictive models).
