This is a linkpost for https://rethinkpriorities.org/publications/inconsistent-evidence-for-price-substitution
- One prominent strategy for reducing animal product usage is to decrease the prices of plant-based analogs for meat, dairy and eggs. Cross-price elasticities measure how prices of analogs affect sales of animal products, and vice versa.
- Previously, we found cross-price elasticities that sometimes indicated decreased plant-based milk prices could cause increased consumption of dairy milk. To see whether this result replicated, we studied elasticities of butter and margarine.
- We synthesize 51 cross-price elasticities from 18 demand studies of butter and margarine.
- We expected butter and margarine to be substitutes. Instead, we observed wide variation in estimates, complementarity, and even opposite signs of two elasticities for the same pair of products in the same setting (study, time, country, etc.).
- Margarine was a substitute for butter in two thirds of estimates, while butter was a substitute for margarine in about half of estimates.
- The results are likely explained by some combination of methodological issues and complex consumer behavior.
- Estimating elasticities from observational data is very difficult, and there is some evidence of methodological issues in the literature. Consumer behavior may be highly context specific.
- Our best highly uncertain guess is that complex consumer behavior contributes slightly more of the observed variation in results, with methodological issues accounting for the remaining slight minority of variation.
- Price substitution between plant-based analogs and animal products is not a certainty.
- It is possible that decreasing plant-based analog prices causes harmful increases in animal product usage in some contexts.
- Research aiming to test behavioral theories that might explain our results and to validate observational estimates of elasticities against experimental methods may help clarify consumer behavior.