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University' M icnxilms International 300 N. Zeeb Road Ann Arbor, Ml 48106 8503277 S jo la n d e r, R ichard EFFECTS OF MICHIGAN’S MANDATORY BEVERAGE CONTAINER DEPOSIT LAW ON THE MARKET FOR BEVERAGES Michigan State University University Microfilms International 300 N. Zeeb Road, Ann Arbor, Ml 48106 Ph.D. 1984 PLEASE NOTE: In all c a s e s this material h as been filmed in the best possible way from th e available copy. Problem s encountered with this d o cum ent have been identified here with a check m ark V 1. G lossy photographs or p a g e s ______ 2. Colored illustrations, pap er or p rin t_____ 3. P hotographs with dark b a ck g ro u n d ______ 4. Illustrations a re poor c o p y _______ 5. P a g e s with black marks, not original 6. Print show s through a s th e re is text on both s id e s of p ag e______ 7. Indistinct, broken or small print on several p ag es 8. Print ex ceed s margin req u irem en ts_____ 9. Tightly bound copy with print lost in spine______ 10. 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O ther_________________________________________;________________________________ University Microfilms International EFFECTS OF MICHIGAN’ S MANDATORY BEVERAGE CONTAINER DEPOSIT LAW ON THE MARKET FOR BEVERAGES By R ic h a rd S jo la n d e r A DISSERTATION S u b m itted t o M ichigan S t a t e U n iv e r s ity i n p a r t i a l f u l f i l l m e n t o f th e re q u ire m e n ts f o r th e d e g re e o f DOCTOR OF PHILOSOPHY DEPARTMENT OF RESOURCE DEVELOPMENT 1984 ABSTRACT EFFECTS OF MICHIGAN'S MANDATORY BEVERAGE CONTAINER DEPOSIT LAW ON THE MARKET FOR BEVERAGES By R ic h ard S jo la n d e r A S tu d y w as d e s ig n e d t o d e te r m in e th e e f f e c t o f a p u b lic p o lic y , th e M ichigan M andatory B everage C o n ta in e r D e p o s it Law (MBCDL) o n f i v e c h a r a c t e r i s t i c s o f t h e m a rk e t f o r b e v e r a g e s : b o rd e r a r e a s a l e s , package m ix , d i s t r i b u t i o n p ro d u c t p ric e s . t o t a l in d u s try s a le s , s y s te m s e n e r g y u s e , a n d The b e e r i n d u s t r y was s e l e c t e d f o r s tu d y b ecau se com prehensive d a t a f o r s a l e s and c o n ta i n e r ty p e s w ere a v a i l a b l e from th e M ichigan L iq u o r C o n tro l Commission. B e c a u s e o t h e r c h a n g e s w ere ta k in g p la c e a t th e tim e th e MBCDL was b e in g im plem ented, s e v e r a l k e y v a r i a b l e s w e re e x p l i c i t l y s e p a r a t e t h e i r e f f e c t fro m t h a t o f th e MBCDL. a n a ly z e d to These in c lu d e d a n o th e r p u b lic p o lic y m easure ( r a i s i n g th e l e g a l d r in k in g a g e ) , p lu s c h a n g e s i n econom ic, p o p u la tio n , and p r ic e v a r i a b l e s . The e v id e n c e from th r e e s e p a r a te demand m odels w hich w ere d ev elo p ed f o r th e s tu d y i n d i c a t e d t h a t th e volume o f b e e r s o ld i n M ichigan dropped b e c a u s e o f t h e MBCDL. a ttrib u te d to A d e c li n e o f b e tw e e n th e p o lic y . s o u th e r n b o rd e r o f M ichig an . 5 and 7 p e r c e n t w as An even g r e a t e r im pact was found a lo n g th e The f i r s t t i e r o f s o u th e rn c o u n tie s in M ichigan e x p e rie n c e d an a d d i t i o n a l 9 p e r c e n t d e c lin e i n s a l e s . The p a c k a g e m ix s h i f t e d away fro m c a n s w ith a d e c l i n e fro m 70 p e r c e n t o f t h e m a r k e t w hen t h e la w to o k e f f e c t t o 40 p e rc e n t a f t e r . C ans h a v e s i n c e i n c r e a s e d t o 50 p e r c e n t . N o n -re filla b le b o ttle s * i n c r e a s e d t h e i r m a rk e t s h a r e an d h a v e b e en ab o u t e q u a l t o r e f i l l a b l e b o ttle s . No e v id e n c e was fo u n d t h a t th e d i f f e r e n c e i n d e p o s it s (5 c e n ts on c e r t i f i e d re filla b le b o t t l e s an d 10 c e n t s f o r a l l o t h e r s ) was e f f e c t i v e i n d i r e c t i n g consum er demand tow ard c e r t a i n c o n ta i n e r s . The c h a n g e i n e n e r g y consum ption f o r th e b e v erag e d e l i v e r y system was c a lc u la te d b a se d on th e a c t u a l M ic h ig a n p a c k a g e m ix . in te n s ity so u rc e s. The e n e r g y f o r e a c h ty p e o f c o n t a i n e r w as c o m p ile d fro m f i v e o t h e r The r e s u l t s showed a 40 p e r c e n t d ro p i n sy ste m s e n e r g y u s e i n M ic h ig a n r e s u l t i n g fo rm t h e MBCDL. T h i s r e s u l t e d p r im a r i ly from th e in c r e a s e d r e c y c l i n g o f c a n s . The p r ic e t o consum ers o f th e MBCDL was e s tim a te d t o be 3 c e n t s p e r c o n ta in e r f o r b o t t l e s an d 4 . 5 c e n t s p e r c a n s d u r i n g t h e f i r s t t h r e e y e a r s a f t e r t h e la w w as im p le m e n te d . I n th e l a s t two y e a r s n a t io n a l a v e ra g e p r i c e l e v e l s have a lm o st c a u g h t up w ith M ichigan b e e r p r i c e s . R a is in g th e minimum d r in k in g age from 18 t o 21 y e a r s o f age i n 1978 was e s tim a te d t o re d u c e b e e r consum ption th ro u g h o u t M ichigan by a b o u t 1 p e rc en t o f t o t a l s a le s . P o l i c y re c o m m en d atio n s f o r s t a t e and f e d e r a l governm ent a s w e ll a s th e b e v erag e i n d u s t r y a r e s u g g e s te d . ACKNOWLEDGMENTS The r e s e a r c h f o r t h i s d i s s e r t a t i o n was p a r t i a l l y fu n d e d hy g r a n t s fro m th e U n ite d S ta te s B r e w e r s A s s o c i a t i o n and t h e A g r i c u l t u r a l E xperim ent S t a t i o n a t M ich ig an S t a t e U n iv e r s ity . A s p e c i a l n o t e o f th a n k s t o my d i s s e r t a t i o n com m ittee f o r t h e i r a s s is ta n c e : S te in m u e lle r, P e t e r K a k e la , c h a i r , and Don T a y l o r . Dan C h a p p e l l e , I w o u ld l i k e J im G o f f , M ilt t o r e c o g n i z e t h e many members o f i n d u s tr y , govern m en t, and s p e c i a l i n t e r e s t g ro u p s ( l o b b i e s ) who w e re h e l p f u l i n p r o v i d i n g b o th d a ta and id e a s . There a r e f a r to o many in d iv id u a ls who gave f r e e l y o f t h e i r tim e , know ledge, and p a t i e n c e t o even a tte m p t to re c o g n iz e them by name. Thank you a l l . N ora B e c k e t t w e l l d e s e r v e s r e c o g n i t i o n f o r h e r a s s i s t a n c e in p r e p a r i n g t h e many d r a f t s amd r e v i s i o n s which were re q u ir e d to p ro d u ce t h i s docum ent. A s p e c i a l th a n k s t o you f o r re a so n s you know to o w e ll. TABLE OF CONTENTS Page C h a p te r I I n tr o d u c tio n to th e B everage C o n ta in e r P ro b lem .................................... 1 I n t r o d u c t i o n . ................................................................................................. 1 Scope o f T h is S tu d y ...................................................................................... 5 E n d n o tes.............................................................................................................. 8 C h a p te r I I L i t e r a t u r e Review ...................................................................................................... The F i r s t EPA S tu d y ................................................................. 9 9 E nergy.................................................. ................................................................ The Oregon MBCDL............................................................................................. 11 The 1974 EPA S tu d y ........................................................................................ 12 M ichigan P u b lic S e r v ic e s Commission.................................................. 13 F e d e ra l Energy A d m in is tr a tio n S tu d y ................... 15 C en e ra l A ccounting O f f ic e S t u d i e s ...................................................... 17 The W harton S tu d y .......................................................................................... 19 M ichigan S tu d i e s ............................................................................................. 21 E n d n o tes.............................................................................................................. 24 iii Chapter III Methods and R e s u l t s ............................................................... ‘................................ 28 I n tr o d u c ti o n ...................................................................................................... 28 S ta te w id e B eer S a l e s ................................................................................... 31 M odels................................................................................................................... 36 Model P e r io d .......................................................................................... 38 V a r ia b le s . ................................................................................. 39 Model 1 ..................................................................................................... 45 Model I I ................................................................................................... 50 A s s o c ia tiv e M odel............................................................................... 65 Summary o f M odels....................................................................... 69 M ichigan B order C ounty S a l e s ........................................ 70 C o n c lu sio n s ............................................................................................. 77 C o n ta in e r M ix................................................................................................... 77 C o n c lu sio n s............................................................................................. 85 E nergy................................................................................................................... 86 C o n c lu sio n s ............................................................................................. 92 P r i c e ..................................................................................................................... 92 C o n c lu sio n s ............................................................................................. 113 E n d n o tes.............................................................................................................. 115 Chapter IV Summary, C o n c lu sio n s, P o lic y R ecom m endations............................................ 121 Summary....................' ........................................................................................... 121 C o n c lu sio n s ................................................................. 123 L im ita tio n s ........................................................................................................ 130 P o lic y R ecom m endations............................................................................... 131 F u tu re R e se a rc h ............................................................................................... 134 A ppendices............................................................. ....................................................... 137 I. II. III. IV . V. D ata Used i n th e S tu d y .................................................................. 137 O th e r V a r ia b le s T e s te d i n Model I I .............................. 142 M ichigan C o u n tie s ............................................................................. 143 Sample W eights o f M ichigan B eer P ack ag es .............. 144 Chaange i n M ichigan B eer P r i c e s from 1976 B ase................ 145 B ib lio g ra p h y ................................................................................... .. 147 t ♦ V LIST OF TABLES Table Page 1. T e s t o f P o p u la tio n H y p o th e se s .......................................................... 2. Model I : M ichigan B eer S a le s , O rd in a ry L e a s t S q u ares 43 R e g re s s io n ............................................................................................... 3. 47 Model I : M ichigan B eer S a le s , F i r s t O rder S e r i a l C o r r e la tio n C o r r e c tio n R e g re s s io n T ech n iq u e......................... 4. Summary o f Model 1 ................................................................................. 5. Model I I : M ichigan B ee r S a l e s , O rd in a ry L e a s t S q u a re s 51 B e g re s s io n . ........................... 59 6. Summary o f Model I I ............................................................................... 7. A s s o c ia tiv e M odel, R e la tin g M ichigan B eer S a le s to N o rth - C e n tra l R e g io n a l 48 62 A verage S a le s ..................................... 67 8. M ichigan B eer S a le s , 1977-1980 B o rd er and S ta te Com parison 74 9. M ichigan B eer S a le s , 1971-1972 B o rd er and S t a t e C om parison 74 10. M ichigan Package Mix by C o n ta in e r Type and M arket S h a r e . . . 81 11. T o ta l Energy f o r B eer D e liv e r y System hy C o n ta in e r T y p e ... 88 1 2. Average M ichigan Premium B eer P r i c e s ........................................ 13. B eer P r i c e I n d ic e s f o r M ich ig an and th e N a tio n , B o t t l e s . . . 100 14. B eer P r ic e I n d ic e s f o r M ichigha and th e N a tio n , Cans 101 99 15* G ross M argin f o r P ackag ed B ee r i n M ich ig an ........................... 105 vi LIST OF FIGURES Figure Page 1. M ichigan B eer S a le s - W ith Trend L in e s .......................................... 32 2. M ichigan Packaged B eer S a l e s ................................................................ 34 3. M ichigan B eer S a le s - As P e r c e n t o f Base Y ear 1967............... 35 4. B in a ry V a ria b le C o n c e p t . . ................................... 40 5. P o p u la tio n H y p o th e se s ................................................................................ 42 6. M ichigan Unemployment R a te .............................. 46 7. Model I - A c tu a l and F i t t e d M ich ig an B eer S a l e s ...................... 52 8. M ichigan T o ta l P e r s o n a l Incom e....................... 54 P. M ichigan B eer P r i c e I n d e x ....................................................................... 56 10. P r ic e - Income V a r i a b l e ....................... 57 11. Model I I - A c tu a l and F i t t e d M ich ig an B eer S a le s .................... 60 12. P r o je c tio n o f M ichig an B eer S a le s 1979-1983 Based on E s ta b lis h e d T ren d s f o r Each V a r ia b le Compared W ith A c tu a l V alu es f o r Each V a r ia b le ..................................... 64 13. N o rth - C e n tra l R eg io n S t a t e s B eer S a le s I n d i c e s ........................ 66 14. A s s o c ia tiv e M odel, A c tu a l and F i t t e d M ichigan B eer S a l e s . . 68 13. R e la tiv e Changes i n P ackage B ee r S a le s , B o rd e r and S t a t e . . 73 16. M ichigan M arket S h are by Package Type.............................................. 82 17. M ichigan Packaged B ee r - System s Energy P r o f i l e ......................... 90 18. R e la tiv e M ichigan B eer P r ic e I n d ic e s - v ii 6 /1 2 B o ttle Package 102 19. R e la tiv e M ichigan B eer P r i c e I n d ic e s - 12/12 CanP a c k a g e .. 103 20. M ichigan B o ttle P r ic e In d ex R a tio s , R e la tiv e Change i n C ro ss M arg in s........................................................................................ 107 21. M ichigan Can P r i c e In d e x R a tio s , R e la tiv e Change i n G ross M arg in s........................................................................................ 108 22. Change i n th e R e t a i l P r i c e o f M ichigan B eer i n C u rre n t D o l l a r s .......................... ........................................................ 111 23- Annual Amount M ichigan B eer Consumers P a id a f t e r 1978 Ahove I n f l a t i o n .................................................................................... 112 v iii CHAPTER I I n tr o d u c ti o n to th e B everage C o n ta in e r Problem Introduction Many in d iv id u a ls and g ro u p s c o n s id e r b e e r and s o f t d rin k c o n ta in e r s to be a s i g n i f i c a n t e n v ir o n m e n ta l o r s o c i a l p ro b le m . A t t e n t i o n becam e f o c u s e d o n n o n - r e f i l l a b l e b e v e ra g e c o n t a i n e r s f o r a number o f r e a s o n s . F or exam ple, i n 1971 B a r r y Commoner d e s c r i b e d an e n v iro n m e n ta l c r i s i s i n h i s book, The C lo sin g C i r c l e ; 1 S e v e r a l b i l l i o n y e a r s ago l i f e a p p e a re d and was n o u r is h e d by t h e e a r t h ' s s u b s t a n c e . As l i f e grew , i t e v o lv e d , i t s o ld fo rm s tra n s fo rm in g th e e a r t h ' s s k i n a n d new o n e s a d a p t i n g t o t h e c h a n g e s ... The e n v iro n m e n ta l c r i s i s i s a s ig n t h a t th e f i n e l y s c u lp tu r e d f i t b etw een l i f e and i t s s u r r o u n d i n g s h a s begun t o c o r r o d e . As th e l i n k s betw een one l i v i n g t h i n g and a n o t h e r , a n d b e t w e e n a l l o f them and t h e i r s u r r o u n d i n g s , b e g in t o b re a k dow n, t h e d y n a m ic i n t e r a c t i o n s t h a t s u s t a i n th e w hole have begun t o f a l t e r and, i n some p l a c e s , t o s to p . He w ent on t o i d e n t i f y th e l e a d e r in th e ra c e eco sy stem a s th e n o n - r e f i l l a b l e in d e x , th e s e b o ttle s b o ttle . had in c re a s e d to d e s tro y A c c o r d in g t o h i s 5 3 ,0 0 0 p e r c e n t . 2 our 1 9 4 6 -1 9 7 0 T he f i r s t n o n - r e f i l l a b l e b o t t l e s w ere produced d u rin g V o rld War I I t o s u p p ly b e e r f o r m o r a le t o A m e ric a n t r o o p s o v e r s e a s . 3 T h u s , t h e f i g u r e c i t e d by Commoner was com paring s a l e s f o r a n i n f a n t i n d u s t r y i n 1946 w i th t h o s e o f a m atu re i n d u s tr y i n 1970. T h is p o i n t , how ever, was i r r e l e v a n t t o an i n c r e a s i n g l y i m p o r t a n t and i n f l u e n t i a l p u b l i c c a l l e d e c o l o g i c a l l y co n cern ed c o n su m e rs.1* The b e v e ra g e c o n ta i n e r problem h a s b een d e b a te d governm ent and i n th e p o p u la r p re s s s i n c e a r o u n d 1 9 7 0 . a t a l l le v e ls of The s p i r i t o f 2 th is e c o lo g ic a lly c o n c e rn e d c o n su m e r m ovem ent f o r a ban on n o n - r e tu r n a b le b e v e ra g e c o n ta i n e r s in M ichigan was d e s c rib e d by Snow and W right ( 1 9 7 7 ) .5 F o r e n v i r o n m e n t a l i s t s t h e w a s p - w a i s t e d co k e b o t t l e a n d t h e r e d an d w h i t e B u d w e i s e r c a n s t r e w n a c r o s s t h e c o u n t r y s i d e h a d b e co m e w o r l d - w i d e s y m b o ls o f A m e r i c a ' s o r g y o f c o n s u m p tio n and w a s te . W h at o n e i n d u s t r y o f f i c i a l had c a l l e d t h e " m i r a c l e " o f A m e ric a n d i s t r i b u t i o n an d p a c k a g in g w as f o r th em t h e so u rc e o f a n g e r and sh am e. I n a w o rld o f e x p l o d i n g p o p u l a t i o n and s h r i n k i n g r e s o u r c e s , and w here m i l l i o n s l i v e d i n s q u a l o r , e c o n o m ic e x p a n s io n a c h ie v e d by in c r e a s e d p a ck a g in g r a t h e r t h a n p r o d u c t im p ro v e m e n t and by s t i m u l a t i n g d e s i r e f a r b e y o 'n d l e g i t i m a t e n e e d w a s o u tra g e o u s . In fa c t, th e 'w a s p - w a i s t e d c o k e b o t t l e ' r e f e r r e d t o w as t h e c h a ra c te ris tic r e f i l l a b l e b o ttle , s m a l l e r i n t h e m id d le t h a n a t t h e s h o u l d e r and b o tto m , w h ic h h ad b e e n i n u s e t h r o u g h o u t much o f t h i s c e n tu r y f o r C oca-C ola. r e f illa b le b o ttle . I n t e r e s t i n g l y , i t was i n a lm o st a l l i n s t a n c e s a However, su ch in f o r m a tio n d o es n o t seem t o have been im p o r ta n t i n much o f th e d e b a te . Many s t u d i e s w ere c o n d u cte d o n th e p o t e n t i a l e f f e c t s o f m andatory d e p o s i t s , b u t i n th e cam p aig n s f o r p a s s a g e o f t h e M ic h ig a n M a n d a to ry B e v e ra g e C o n ta in e r D e p o s it Law (MBCDL) th e arg u m en ts on b o th s i d e s w ere p r e s e n te d a t a n e m o tio n a l l e v e l . I n M ic h ig a n , t h e p r o - B o t t l e B i l l e n v i r o n m e n t a l i s t s s u c c e s s f u l l y p o rtr a y e d th e m s e lv e s a s d e fe n d e rs o f th e p u b lio i n t e r e s t w h ile d e p i c t i n g t h e i r b e v e r a g e i n d u s t r y o p p o n e n ts a s i n t e r e s t e d o n ly i n t h e i r own p r o f i t s . N o n - r e f i l l a b l e b e v e ra g e c o n ta i n e r s became s y m b o ls o f t h e " th ro w a w a y s o c i e t y . " s l o g a n , "no d e p o s i t , no r e t u r n , " The th ro w a w a y a n d i t s becam e c e n t r a l t o an i d e o l o g i c a l a s w e ll a s te c h n o lo g ic a l b a t t l e o f l i f e s t y l e s . ® T hree f a c t o r s h e l p t o c l a r i f y how b ev erag e c o n ta in e r s came to be s in g le d o u t f o r s u c h w id e s p r e a d a t t e n t i o n . F i r s t , th e re h as been a d r a m a tic in c r e a s e i n th e volume o f b e e r and c a rb o n a te d s o f t d rin k s a l e s d u r in g t h e l a s t t h i r t y y ears. T o ta l s a le s in c re a s e d by 400 p e r c e n t . 7 At th e same tim e th e m ark et s h a re o f packaged b e v e r a g e s was i n c r e a s i n g in c o m p a ris o n to f o u n ta in o r d ra u g h t s a l e s . b e v e r a g e m a rk e t t h e r e w as a l s o W ith in t h e p a c k a g e d a m a jo r s h i f t i n th e p a c k a g e m ix . R e f i l l a b l e b o t t l e s w e re d e c l i n i n g i n f a v o r o f cans and n o n - r e f i l l a b l e b o t t l e s and c a n s . The com bined e f f e c t o f i n c r e a s i n g s a l e s , in c re a s in g m arket s h a re f o r packaged b e v e ra g e s , and th e ch an g in g package mix le d to an e x p o n e n tia l grow th r a t e f o r b e v e ra g e c o n ta in e r s s in c e W orld War I I . The second f a c t o r draw ing s p e c i a l a t t e n t i o n to b e v erag e c o n ta in e r s was l i t t e r . s o c ia lly L i t t e r c a n b e d e f i n e d a s s o l i d w a s te d is p o s e d o f i n a « u n d e s i r a b l e an d i l l e g a l m a n n e r. L i t t e r an d t h e l o s s o f e s t h e t i c v a lu e s i t p ro d u c e d , more th a n econom ic v a l u e s , w e re r e c e i v i n g i n c r e a s i n g a t t e n t i o n from p o lic y m akers a s a s o c i a l c o s t r e s u l t i n g from n o n - r e f i lla b l e b ev erag e c o n ta in e r s . The n o n - r e f i l l a b l e b e v erag e c o n t a i n e r p o r t i o n o f l i t t e r h a d b e e n i n c r e a s i n g and was e s tim a te d to compose ab o u t 20 p e r c e n t o f M ichigan l i t t e r by volume i n 1 9 7 8 .8 B o ttle s and c a n s , u n lik e p a p e r o r g a rb a g e , n e i t h e r blow away from r o a d s i d e s n o r decom pose a t any a p p r e c i a b l e r a t e . They a r e a c u m u la tiv e and e a s i l y i d e n t i f i a b l e p o r ti o n o f l i t t e r . The th ird f a c t o r was a new i n t e r e s t i n en erg y consum ption d u rin g th e 1970s. Bruce Hannon s in g le d o u t b e v erag e d e liv e r y sy ste m s f o r s tu d y an d em ployed e n e r g y a s t h e u n i t o f a n a l y s i s . He co m p ared b e v e ra g e d e liv e r y sy stem s and d e v elo p e d e n erg y r a t i o s f o r t h e v a r i o u s c o n t a i n e r sy s t e m s . 9 H is e n e r g y r a t i o s w e re c a l c u l a t e d a s th e q u o ti e n ts o f th e e n e r g y e x p e n d e d by a n o n - r e f i l l a b l e c o n t a i n e r s y s te m and t h e en erg y expended by a r e t u r n a b l e b o t t l e sy ste m , which he assumed t o b e t h e m o st e c o l o g i c a l l y so u n d sy ste m . The e n erg y c r i s i s o f 1973 o c c u rre d s h o r t l y a f t e r th e p u b l i c a t i o n o f h i s w ork, and made e n e rg y c o n s u m p tio n a n e v e n more im p o rta n t i s s u e . The b e v e ra g e c o n ta i n e r problem c a n b e su m m a riz e d a s i n c r e a s i n g p u b lic c o n c e rn f o r th e r a p id g ro w th i n n o n - r e f i l l a b l e c o n t a i n e r s an d t h e i r r e l a t i o n to re s o u rc e u s e , T h e re h a s been litte r and e n e r g y . in c r e a s i n g p r e s s u r e from th e p u b l i c d u r i n g t h e l a s t 25 y e a r s f o r t h e g o v e r n m e n t t o i n t e r v e n e i n t h e f r e e m a r k e t s y s te m i n f a v o r o f t h e i n t e r e s t s o f th e g e n e r a l p u b lic i n c a s e s o f p e r c e i v e d m a r k e t f a i l u r e . T h e n o n - r e t u r n a b l e b e v e r a g e c o n t a i n e r w as s e e n by m any p e o p le t o c o n s t i t u t e such a m a rk e t f a i l u r e . le v e ls o f g o v e rn m e n t a s P o li c i e s h av e b een p ro p o se d a t a l l a m e th o d o f c o rre c tin g fo r p e rc e iv e d d e f i c i e n c i e s i n t h e f r e e m a r k e t f o r b e v e r a g e s th r o u g h l e g i s l a t i n g m andatory d e p o s it s on a l l c o n t a i n e r s . T here a re two m ajo r ty p e s o f p o lic y m e a s u r e s w h ic h h a v e p ro p o sed to a d d re s s th e b e v e ra g e c o n ta i n e r p ro b lem . One i s a c o n t a i n e r t a x and th e o th e r i s th e more w e ll known d e p o s it sy ste m . A package t a x , s p e c i f i c a l l y f o r b e v e r a g e c o n t a i n e r s w as recom m ended i n E n v ir o n m e n ta l P r o t e c t i o n A gency (EPA) i n t h e i r f i r s t problem . Such a ta x h a s n o t b een e n a c te d in th is been 1972 by t h e s tu d y o f t h i s c o u n t r y . 10 As o f J a n u a ry , 1984, n in e s t a t e s have im plem ented m andatory b e v e ra g e c o n ta in e r d e p o s i t la w s (MBCDL). T h e s e a r e M ic h ig a n , O re g o n , V erm ont, M aine, Iow a, C o n n e c tic u t, M a s s a c h u s e tts , D elaw are, and New Y ork. The p r e s e n t s t u d y a n a l y s e s th e e f f e c t o f t h e M ichigan MBCDL a s a p u b lic p o lic y on f i v e c h a r a c t e r i s t i c s o f t h e m ark et f o r b e e r . T h e re i s g e n e r a l a g re e m e n t among I n t e r e s t e d p a r t i e s on c e r t a i n e f f e c t s o f t h i s p o lic y m easu re. Some o f th e s e a re t h a t t h e r e w i l l be a r e d u c t i o n i n (1 ) b e v e r a g e c o n ta i n e r r e l a t e d l i t t e r (2 ) m u n ic ip a l s o l i d w a ste e q u a l t o th e volume o f c o n ta i n e r s r e u s e d o r r e c y c le d i n s t e a d o f b e in g d i s c a r d e d , and (3 ) r e s o u r c e u s e , i n c l u d i n g e n e r g y . P r e d i c t i o n s on o t h e r is s u e s , how ever, su ch a s consumer r e a c t i o n t o t h e new a s s o r t m e n t o f p a c k a g e s o f f e r e d i n th e m a rk e tp la c e , th e e f f e c t o f th e p o li c y on consum er p r i c e s , o r th e e f f e c t on consumer demand a r e c l e a r l y i n c o n f l i c t . P re d ic tio n s h a v e b e e n h a m p e re d by t h e l a c k o f an a c c u r a te d a t a b a se from a r e g io n w ith e x p e r ie n c e u n d e r s u c h l e g i s l a t i o n . M ic h ig a n c o n s u m e rs h a v e now l i v e d w ith th e p o lic y f o r o v e r f i v e y e a r s . Many o f th e a ssu m p tio n s n e c e s s a ry i n p r i o r w ork c a n be r e p l a c e d by d a t a . an a n a l y s i s s h o u ld be o f v a lu e to S u ch o t h e r s t a t e s an d t h e f e d e r a l governm ent a s th e y c o n s id e r s i m i l a r la w s. Scone o f T h is Study T h i s s tu d y a n a ly z e s f i v e e le m e n ts o f th e b e v e ra g e d e l i v e r y system t h a t may have changed a s a r e s u l t o f t h e M ic h ig a n M a n d a to ry B e v e ra g e C o n ta in e r D e p o sit Law. These a r e : 1) t o t a l M ichigan b e e r s a l e s , 2) M ichigan b o r d e r c o u n ty b e e r s a l e s , 3) package m ix by c o n ta in e r ty p e , re filla b le b o ttle s , n o n - r e f i l l a b l e b o t t l e s and c a n s , 4) e n e rg y consumed i n M ic h ig a n 's b e e r d i s t r i b u t i o n sy ste m , and 5) b eer p ric e s . The M ic h ig a n law c o v e r s m o st c a rb o n a te d d r in k s — so d a , w a te r, and m alt b e v e ra g e s. The M ichigan L iq u o r C o n tro l C om m ission r e c e i v e s a copy o f every in v o ic e f o r sh ip m e n ts o f b e e r i n t o and w ith in th e s t a t e i n o r d e r to c o lle c t s ta te ta x e s on a l c o h o l . T hese re c o rd s com prehensive, a c c u r a te , and p ro v id e a n e x c e lle n t d a ta b a s e . o n ly b e e r i s a n a ly z e d i n th is s tu d y . T h e re i s . n o a re T h e re fo re , c o m p a ra b le t a x on so d a, and s a l e s re c o rd s a r e th e p r o p e r ty o f each in d iv id u a l b o t t l e r . S o c ia l s c ie n c e r e s e a r c h i s c o m p lic a te d by t h e l i m i t e d a b i l i t y of t h e r e s e a r c h e r t o c o n t r o l c o n d i t i o n s i n th e e n v iro n m e n t i n o rd e r to i s o l a t e a s i n g l e , u n c o n tr o lle d v a r i a b l e f o r s tu d y . no. e x c e p t i o n . The p r e s e n t w ork i s At t h e sam e tim e a s t h e M ic h ig a n M a n d a to ry B ev erag e C o n ta in e r D e p o sit Law (MBCDL) becam e e f f e c t i v e , a n o t h e r m a jo r p o l i c y re la te d t o b e e r consum ptio n w a s'im p le m e n ted . M ic h ig a n 's l e g a l d rin k in g age was r a is e d from 18 t o 21 y e a r s o f age on December 2 3 , 1978.11 I n a d d itio n to th e s e two d i s c r e t e p u b lic p o lic y c h an g es, tw o o t h e r g r a d u a l c h a n g e s w e re o c c u r r i n g i n M ic h ig a n t h a t may have in flu e n c e d consumer b e h a v io r r e l a t e d to b e v e ra g e consu m p tio n . F i r s t , th e p r i c e o f b e e r h a s r i s e n s u b s t a n t i a l l y s in c e im p le m e n ta tio n o f th e MBCDL. Second, th e M ichigan economy, g e n e r a lly more v o l a t i l e th a n th e n a t i o n a l economy, e x p e rie n c e d two r e c e s s i o n s i n th e l a s t f i v e y e a r s . A ll f o u r o f th e s e chan g es o c c u rre d c o n c u r r e n tly . a re fo u r r e la te d T h e re fo re , th e r e v a r i a b l e s t h a t c o u ld h a v e c h a n g e d M ic h ig a n b e e r c o n su m p tio n p a t t e r n s s i g n i f i c a n t l y . T h e se h a v e a l l b e e n c a r e f u l l y c o n sid e re d i n th e p r e s e n t s tu d y i n an e f f o r t to i s o l a t e th e in f lu e n c e o f th e ta r g e t v a r ia b le , t h e MBCDL, on b e e r s a l e s . T h e se c h a n g e s w e r e s t u d i e d an d t h e d e g r e e o f i n f l u e n c e t h a t th e MBCDL had on a l l f i v e i s 7 d e s c rib e d below . to m a n d a to ry There a r e many o th e r changes t h a t have been a t t r i b u t e d b e v erag e c o n ta in e r d e p o s it la w s in g e n e ra l, and s p e c i f i c a l l y to th e r e s u l t s o f th e M ichigan law , t h a t a r e n o t d i s c u s s e d i n th e p r e s e n t r e p o r t . Some o f t h e s e i n v o l v e l i t t e r , s o l i d w a ste , employment, and la b o r p r o d u c t i v i t y . M o st p r o p o n e n t s and o p p o n e n ts a g r e e t h a t a MBCDL w i l l r e d u c e b e v e ra g e r e l a t e d l i t t e r and t h a t i t w i l l r e d u c e s o l i d w a s te by t h e num ber o f a d d i t i o n a l c o n ta i n e r s b e in g re u s e d o r re c y c le d a s a r e s u l t o f t h e la w . The i s s u e i s t h e c o s t o f t h e s e an d o t h e r b e n e f i t s . a n a ly s is c o n ta in e d in t h i s s tu d y s p e c i f i c a l l y T he a d d r e s s e s th e c o s t to consum ers i n th e form o f h ig h e r r e t a i l p r i c e s . The s tu d y i s d i v i d e d i n t o th re e s e c tio n s . I n c h a p t e r two t h e l i t e r a t u r e on th e b e v e ra g e c o n ta i n e r p ro b le m iB p r e s e n t e d . It s ta rts w ith th e g e n e r a l s t u d i e s o f th e i s s u e s and th e n fo c u s e s on th e work done s p e c i f i c a l l y a n a ly s in g th e p o lic y i n M ich ig an . C h a p te r t h r e e p r e s e n t s t h e m eth o d s an d r e s u l t s o f e a c h o f t h e f i v e im p a c ts s tu d ie d . T hree demand m odels f o r b e e r s a l e s i n M ic h ig a n 's s o u th e rn b o rd e r a r e s t u d i e d . A p r e s e n ta tio n o f th e numbers o f each ty p e o f package s o ld o v e r an e i g h t y e a r p e rio d p ro v id e s th e d a ta b a se f o r e s ti m a tin g th e e n erg y consumed i n d i s t r i b u t i n g b eer. A co m p ariso n i s made o f energy u se b e f o r e and a f t e r enactm ent o f th e MBCDL. F i n a l l y , th e change i n p r i c e s a t a l l l e v e l s o f t h e d i s t r i b u t i o n c h a n n e l i s d e term in e d f o r th r e e y e a r s b e fo re and f i v e y e a rs a f t e r th e law to o k e f f e c t . The f i n a l c h a p te r p r e s e n ts th e summary and c o n c lu s io n s from th e p r e s e n t s tu d y a lo n g w ith p o lic y recom m endations and s u g g e s tio n s f o r f u t u r e r e s e a r c h . 8 E ndnotes 1. Barry Commoner, The C lo sin g C ircle (New York: 1971), p. 11 :--------------- ------------- Alfred A. Knopf, 2. Ib id ., p. 143* 3- Prank S ellin g er, "Statement B efore th e P anel on th e M aterials Policy o f the Subcommittee o f Environmental P o llu tio n o f th e Committee o f P u b lic Works, U nited S ta te s Senale (July 11, 1974). " In R eferen ce Source Book, Chapter 2 (Washington, D.C.: U.S. Brewers A ssociation). 4. Lawrence A.Crosby, James D. G ill, a n d J a m e s R . T a y l o r , "Consumer/Voter Behavior in th e Passage o f the- M ich igan C ontainer Law". Journal of Marketing,Vol. 45 (Spring 1981), p. 19-32. ; 5. Robert E. Snow and David E.Wright, "No D e p o s i t , No R etu rn : Technology and V alues in th e M ichigan B o ttle Referendum." Lyman B riggs C o lle g e , Michigan State U niversity, 20 October 1977, p* 3-4- (Mimeographed.) 6. I b id ., p. 11. 7. O ffice o f Technology Assessment, M a t e r i a l s and E n er g y from Municipal Waste (Washington, D.C.: Government P rinting O ffice beportJTO =M^95', 1979). 8. Daniel B .S y re k , Michigan L itter : A fter. Report by the In stitu te f o r A pplied R esearch, Sacramento, C a lif o r in ia , t o The S p e c ia l J o in t C om m ittee o f t h e M ich ig a n L e g i s l a t u r e t o S tu d y t h e Im pact o f t h e B ev e r a g e C o n ta in e r D ep o sit Law. 28 February 1980. 9. Bruce Hannon, "System Energr and R e c y c lin g : A Study o f th e Beverage In d u stry ," Report Number 23 (Urbanar-Champaign, IL .: Center for Advanced Computation, University of I l l in o i s , 17 March 1973)* 10. Taylor H.Bingham and P aul M u llig a n , The B everage Container Problem. Research T ria n g le I n s t i t u t e , Research T ria n g le Park, NC. , f o r The E n v ir o n m e n ta l P r o t e c t i o n Agency (Washington, D.C.: Government P r in tin g O ffic e , September 1972). 11. Michigan Compiled Laws, S e c t io n 4 2 6 .3 3 (1978), or P u b lic A cts 1978. E ffectiv e date 23 December 1978. CHAPTER II L i t e r a t u r e Review The F i r s t EPA S tu d y - 1972 The f i r s t m a jo r g o v e r n m e n t- s p o n s o r e d s t u d y on t h e s u b j e c t o f re s tric tiv e b e v erag e E n v iro n m e n ta l c o n ta in e r le g is la ti o n P ro te c tio n A g e n cy (EPA) i n c o n d u c te d by t h e R e s e a r c h T r i a n g l e I n s t i t u t e w as 1 9 7 2 .1 done th e T h a t s t u d y was a n d v ie w e d c o n t a i n e r s a s c a u s in g an e n v iro n m e n ta l p ro b lem y l i t t e r . fo r b ev erag e Some consum ers o f b e v e ra g e s l i t t e r t h e i r empty c o n ta i n e r s r a t h e r th a n d is p o s in g o f them p ro p e rly , c r e a tin g s o c ia l c o s ts . B e v e ra g e c o n t a i n e r s w ere found t o compose an im p o rta n t s h a re o f l i t t e r (a b o u t 20 p e r c e n t ) . The EPA s t u d y u s e d a m acroeconom ic a n a l y t i c a l a p p ro a ch and found t h a t b e v e ra g e c o n ta i n e r s w ere n o t a r e s o u r c e p ro b le m a t t h a t l e v e l o f a n a ly s is . M e ta l c o n t a i n e r s c o n s t i t u t e d a r e l a t i v e l y s m a ll p o r ti o n o f th e t o t a l U .S. consum ption o f aluminum and s t e e l , and th e g l a s s san d and li m e s t o n e u s e d i n b o t t l e m a n u fa c tu re w ere p l e n t i f u l r e s o u r c e s . An a l l r e f i l l a b l e b o t t l e sy stem w ould l e a d to en erg y s a v in g s , b u t th e y would be i n s i g n i f i c a n t r e l a t i v e t o t o t a l U .S. en erg y co n su m p tio n . The EPA r e p o r t c o n c lu d e d t h a t e i t h e r a h ig h m andatory d e p o s it or a low package t a x w ith th e re v e n u e s b e in g used f o r more f r e q u e n t l i t t e r c o lle c tio n s , c o u ld re d u c in g l i t t e r . p ro v id e s i g n i f i c a n t e n v i r o n m e n t a l b e n e f i t s by T hey f a v o r e d th e ta x as th e m ost a p p r o p r i a t e g o v e rn m e n t p o l i c y b e c a u s e i t was p r e d i c t a b l e , l e s s c o s t l y t o consum ers and p ro d u c e rs , and e a s i e r to a d m i n i s t e r .2 The ta x l e v e l p ro p o sed i n th e s tu d y was betw een o n e h a l f a n d o n e o e n t p e r m a n u f a c tu r e d 9 c o n ta in e r. 10 Such a ta x w o u ld i n c r e a s e t h e p r i c e o f c o n v e n ie n c e (b e v e ra g e s in n o n - r e f i l l a b l e c o n ta i n e r s ) by th e amount o f th e nom inal t a x . h o w e v er, have a n e g lig ib le e ffe c t I t w o u ld , on th e p r ic e o f b e v e ra g e s in r e f i l l a b l e p a ck a g e s, where t h e t a x w o u ld b e d i v i d e d by t h e num ber o f tim e s th e package was f i l l e d . T h is 1972 EPA r e p o r t w as t h e f i r s t and o n ly s tu d y t o in c lu d e a package ta x a s an a l t e r n a t i v e p o l ic y m easure f o r a d d r e s s in g th e b e v e ra g e c o n t a i n e r p r o b le m . L a te r s t u d ie s , a lth o u g h n o t c o n t r a d i c t i n g th e r e s u l t s o f t h i s f i r s t s tu d y , came t o d i f f e r e n t c o n c l u s i o n s o n p o l i c y re c o m m e n d a tio n s . T h is may have been b e c a u se a n a l y s t s d id n o t c o n s id e r a s b ro ad a ra n g e o f p o lic y a l t e r n a t i v e s i n f u t u r e s t u d i e s . Energy Two o th e r e v e n ts i n 1972 h e lp e d t o b e v e ra g e c o n ta i n e r l e g i s l a t i o n . U n iv e rs ity o f I l l i n o i s . s e t th e s ta g e f o r f u tu r e The f i r s t w as a s tu d y by H annon a t t h e Energy was s in g le d o u t a s th e a c c o u n tin g u n i t by w hich t o Judge t h e e f f e c t i v e n e s s o f m a n d a to ry b e v e r a g e c o n t a i n e r d e p o s it l e g i s l a t i o n (MBCDL).3 Hannon was i n ag reem en t w ith th e EPA s tu d y on th e r e l a t i v e p o r tio n o f th e n a t i o n 's e n e rg y consumed by t h e b e v e r a g e d e l i v e r y sy ste m , t h i r t y - f o u r o n e - h u n d r e d th s o f one p e r c e n t i n 1970 a c c o rd in g t o h i s f i g u r e s . At a lo w e r l e v e l o f a g g r e g a t i o n c o n s is tin g o f th e b ev erag e d e liv e r y s y s te m i n i s o l a t i o n fro m t h e r e s t o f t h e economy, how ever, th e p o t e n t i a l e n e rg y s a v in g s u n d e r a MBCDL w ere h ig h ly s ig n if ic a n t.^ H annon found t h a t 55 p e r c e n t o f t h a t e n erg y u sed i n th e b e v e ra g e in d u s tr y co u ld be sav ed th ro u g h t h e i m p l e m e n t a t i o n o f a n a l l r e f i l l a b l e b o t t l e sy ste m . T h is c o n c e p tu a l l e v e l f o r p o lic y a n a l y s i s was q u ic k ly a d o p te d by b o th g o v e rn m e n t a g e n c y a n a l y s t s a n d e n v i r o n m e n t a l i n t e r e s t g ro u p s . R obert W einberg, an a n a ly s e s an d c a l c u l a t e d in te n s iv e , in d u s try a n a ly s t, re v ie w e d th e en erg y t h a t t h e b e v e r a g e i n d u s t r y w as l e s s e n e r g y p e r d o l l a r o f o u tp u t, th a n th e a v e ra g e d o l l a r o f g ro s s n a t i o n a l p r o d u c t (Q N P). ^ A d o l l a r s p e n t on b e e r c o n t a i n e d o n ly 40 p e rc e n t a s much e n e rg y a s a d o l l a r o f a v e r a g e GNP. E v en i n alu m in u m c a n s , th e m ost e n erg y i n t e n s i v e b e v e ra g e c o n t a i n e r , e n e rg y use was s t i l l below a v e ra g e . W ith th e l o s s o f c o n v en ie n c e p a ck a g in g th ro u g h a MBCDL, consum ers c o u ld e a s i l y s h i f t t h e i r consum ption p a t t e r n s , s p e n d in g l e s s m oney f o r b e v e ra g e s and more on o t h e r f a r more e n erg y i n t e n s i v e co n su m p tio n ite m s , r e a s o n e d W e in b e rg . S u c h a s h i f t c o u ld e a s i l y d i s s i p a t e a n y e n e r g y s a v i n g s t h a t m ig h t be e x p e c t e d fro m a s h i f t t o r e f i l l a b l e s . T h is argum ent was i n g e n e r a l ag reem en t w ith th e 1972 EPA r e p o r t f i n d i n g t h a t e n e r g y s a v i n g s w o u ld b e i n s i g n i f i c a n t . I t d i d n o t have th e p o p u la r a p p e a l w hich c o u ld be g e n e r a te d w ith im ages o f l i g h t i n g e n t i r e to w n s by m e r e ly s w itc h in g t o a more e c o l o g i c a l l y sound b e v e ra g e c o n t a i n e r . t h a t i n t h i s c o n te x t e c o l o g i c a l l y sound m eant s a v in g e n e r g y . Note The same te r m c a n b e u s e d i n many w ays t o f i t th e n eed s o f re s o u r c e d e p l e t i o n , c o n s e r v a tio n , p r e s e r v a t i o n , r e c o v e r y , r e u s e o r numerous o t h e r c o n c e p t s . T hese d e f i n i t i o n s may be i n c o n f l i c t . The Oregon MBCDL The o t h e r m a jo r e v e n t i n 1972 w as t h e im p l e m e n t a t i o n o f t h e Oregon B e v e ra g e C o n t a i n e r D e p o s i t L e g i s l a t i o n , b e t t e r known a s t h e " B o ttle B i l l . " T h is was p a sse d by th e s t a t e l e g i s l a t u r e w ith th e a c t i v e s u p p o rt o f Oregon G overnor M c C a ll, a n d t o o k e f f e c t i n O c t o b e r , 1972. The law r e q u ir e d d e p o s it s on c a rb o n a te d b e v e ra g e c o n ta i n e r s ( s o f t d rin k b 12 and b e e r ) , and r e q u ir e d t h a t members o f th e d i s t r i b u t i o n c h an n e l s e l l i n g a g iv e n p ro d u c t-p a c k a g e a ls o a c c e p t th e package b ack and r e t u r n th e f u l l re fu n d v a lu e . F i n a l l y , i t p r o h ib i te d rem ovable p u l l t a b s from b e v e r a g e cans. The " B o t t l e B i l l " was w id e l y h a i l e d by e n v i r o n m e n t a l i s t s a s a s i g n i f i c a n t s te p i n r e v e r s i n g t h e tr e m e n d o u s i n c r e a s e i n l i t t e r s o l i d w a s te r e p r e s e n t e d by p a c k a g in g m a t e r i a l s . and I t was o p p o sed , to v a r y i n g d e g r e e s , by a l l s e c t o r s o f in d u s tr y d i r e c t l y a f f e c t e d by i t .® The b i l l was c h a lle n g e d i n th e c o u r ts on th e b a s i s o f d is c r i m i n a t i o n , a s it d id p e o p le . not d ire c tly a d d re s s th e h e a lt h , w e lf a r e , o r s a f e ty o f th e I n d u s tr y l o s t . P u b lic o p in io n was v e ry s tr o n g i n f a v o r o f t h e le g is la tio n . The Gudger and B a ile s s tu d y o f th e O re g o n MBCDL, w h ic h to o k e f f e c t i n 1972, m o d e le d b e v e r a g e s a l e s o v e r a n 11 y e a r p e r i o d u s i n g tr e n d l i n e a n a ly s is . They found t o t a l s a l e s f o r 1973 ( t h e o n ly y e a r o f d a ta a v a i l a b l e a f t e r th e MBCDL) t o be a t th e p r e d i c t e d l e v e l i n c r e a s e o v e r 1972 s a l e s ) . (a s l i g h t A d i s p r o p o r t i o n a t e l y l a r g e amount o f th e i n c r e a s e o f 1973 o v e r 1972 ( t h e i r g ra p h s i n d i c a t e a l l o f t h e i n c r e a s e ) w as i n d r a u g h t s a l e s . ? a c o m p a r is o n o f 1973 r e t a i l p r i c e s w ith 1972 p r i c e l e v e l s was made i n Oregon and th e n e ig h b o rin g s t a t e , W a s h in g to n . The p r i c e o f b e e r i n r e f i l l a b l e b o t t l e s in c r e a s e d much more i n Oregon (a b o u t 10 p e rc e n t m o re ), w here r e f i l l a b l e p e rc e n t in 1973.® b o ttle s a l e s i n c r e a s e d 200 The r e l a t i v e r e t a i l p r ic e o f b e e r i n c an s rem ain ed c o n s ta n t betw een th e s t a t e s . lire .1.9.74 EPA Study In 1974 t h e EPA p u b l i s h e d a n o th e r s tu d y on b e v e ra g e c o n t a i n e r s , R e s o u rc e and E n v iro n m e n ta l P r o f i l e An a l y s i s o f N ine B everage C o n ta in e r 13 A l t e r n a t i v e s . 9 T h is In s titu te s tu d y an d a n a l y s e d a l t e r n a t i v e b e v e r a g e c o n ta i n e r sy ste m s on th e b a s i s o f raw m a t e r i a l s p o llu tio n . w a s c o n d u c te d by t h e M id w est R e s e a r c h c o n s u m p tio n , e n e r g y u s e , an d e n v i r o n m e n t a l I t was a p a r t i a l a n a l y s i s o f a l t e r n a t i v e sy stem s i n term s o f o n ly th e s e t h r e e f a c t o r s i n i s o l a t i o n from th e r e s t o f t h e eco n o m y . A r a n k in g system was d e v elo p e d o n each o f th e c r i t e r i a s t u d ie d , le a d in g t o in d ic e s o f e n e rg y u s e , r e s o u r c e u s e an d p o l l u t i o n f o r e a c h c o n t a i n e r ty p e . The r e f i l l a b l e b o t t l e system came o u t " b e s t" i n m ost c a t e g o r i e s . The e n e rg y a n a l y s i s was s i m i l a r t o t h e H annon s t u d y , b u t u s e d a m ore c u rre n t d a ta b ase. The s tu d y m arked a change i n em phasis on th e p a r t o f th e EPA from lo o k in g a t how th e b e v e ra g e i n d u s t r y f i t in to th e g e n e ra l econom y t o t h a t o f a n a l y s i n g t h e b e v e r a g e i n d u s t r y i n i s o l a t i o n . The tr e a tm e n t o f th e s u b j e c t w as th o r o u g h , b u t c o u ld b e m i s l e a d i n g a s a g e n e r a l b a s e f o r p o l i c y recom m endations b e ca u se i t s in g le d o u t c e r t a i n a s p e c ts o f th e b e v e ra g e c o n ta in e r i s s u e t o be s tu d ie d o u t o f th e c o n te x t of t h e e n t i r e s y s te m . At t h i s l e v e l o f a n a l y s i s t h e q u e s t i o n s o f r e s o u r c e u s e , e n e rg y c o n su m p tio n a n d s o l i d w a s te g e n e r a t i o n w e re a l l b o th r e l e v a n t an d s i g n i f i c a n t i s s u e s . I n t h e 1972 EPA s t u d y th e s e i s s u e s w ere o n ly r e l e v a n t . M ichigan. P u b lic S e r v ic e s Commission The P u b l i c S e r v i c e s C o m m issio n (PSC ) i n M ic h ig a n c o m p le te d a m ajor s tu d y o f th e econom ic and employment e f f e c t s o f a MBCDL in 1 9 7 5 .^ T h is s tu d y was s t a r t e d i n th e S t a t e E nergy O ffic e so a p r o j e c t i o n o f th e e f f e c t on e n e r g y u s e w as i n c l u d e d . p o lic ie s to re d u c e The s tu d y was d e sig n e d t o lo o k a t m a te r ia l and e n e rg y c o n s u m p tio n w h ile s i g n i f i c a n t l y c h an g in g th e l i f e s t y l e o f th e p o p u la c e . not I t r e p o r te d t h a t b i l l i o n s o f d o l l a r s c o u ld be s a v e d by r e d u c i n g m a t e r i a l a n d e n e r g y c o n s u m p tio n to a " s o c ia lly d e s ira b le l e v e l ." T h a t l e v e l w as n o t d e fin e d , b u t th e e li m i n a t i o n o f n o n - r e f i l l a b l e b e v e ra g e c o n ta i n e r s " p r o v i d e d a c l a s s i c e x a m p le o f how s u c h r e d u c t i o n s i n r e s o u r c e and e n e rg y use c o u ld be made w ith o u t a l t e r i n g th e l i f e s t y l e . " 1^ The 1963-197*1. s tu d y p e rio d c o n s id e re d in t h e M ic h ig a n PSC s tu d y w as M ichigan b e v e ra g e s a l e s w e re p r o j e c t e d f o r 1 9 7 5 -1 9 7 8 e x t e n d i n g t h e t r e n d l i n e s d e v e lo p e d f o r t h e b a s e p e r io d . by The s tu d y n o te d t h a t p o s s ib le c h an g e s i n b e v e ra g e c o n s u m p tio n m ig h t r e s u l t fro m c o n ta in e r l e g i s l a t i o n . A c h a n g e i n demand would depend o n th e p r ic e e l a s t i c i t y o f demand f o r b e v e ra g e s and consumer a t t i t u d e s to w a rd an a l l r e t u r n a b l e s y s te m . T he r e p o r t a ssu m e d t h a t b e v e ra g e p r i c e s would be lo w e r an d p re s u m a b ly o f f s e t an y l o s s i n c o n v e n i e n c e .^ was assumed t h a t c h a n g in g t o a 100 p e r c e n t r e f i l l a b l e T h e re fo re , i t b o ttle s y s te m e i t h e r th r o u g h a b a n o n n o n - r e f i l l a b l e s , o r by means o f a MBCDL would not a f f e c t s a le s le v e ls . R e ta il p r i c e s i n L a n s in g , M ic h ig a n , i n D ecem ber o f 1974 w e re assum ed t o r e f l e c t th e c o s t o f g o o d s s o l d p l u s a " n o r m a l" p r o f i t f o r each package ty p e . Those w ere th e o n ly p r ic e d a t a c o l l e c t e d . B ev erag es i n r e f i l l a b l e b o t t l e s w e re fo u n d t o be p r i c e d lo w e r t h a n b e v e r a g e s i n one way p a c k a g e s. T h is l e d t o th e a ssu m p tio n t h a t consum ers would spend $14 m illi o n l e s s f o r t h e sam e am ount o f b e v e r a g e s u n d e r t h e assu m ed MBCDL. ^ 3 T he a s s u m e d p a c k a g e m ix u n d e r t h e MBCDL c o n s i s t e d o f r e f i l l a b l e b o t t l e s w hich w ould r e p la c e a l l n o n - r e f i l l a b l e b o t t l e s i n th e m a rk e t, and can s w hich w ould m a in ta in t h e i r p re -la w m ark et s h a r e . in th e r e p o r t , th e c o n c lu s io n s on b e v erag e p r i c e s changed. The L a te r re p o rt c o n c lu d e d t h a t p r i c e s had in c r e a s e d i n Oregon f o r b e v e ra g e s i n b o t t l e s 15 fo llo w in g t h e i r MBCDL, t h a t p r i c e s had a v o l a t i l e n a t u r e , a n d t h a t t h e e c o n o m ic im p a c t on M ichigan consum ers had n o t been i n v e s t i g a t e d i n th e r e p o r t . ^ ** The e n e r g y e f f e c t s o f a MBCDL w e re a ls o a n a ly s e d . The assumed num ber o f e a c h p a c k a g e t y p e consum ed u n d e r t h e p r o p o s e d MBCDL w a s c o m p ared w ith t h e a c t u a l p a c k a g e u se d u rin g 1974. f i g u r e s f o r e ac h package ty p e w ere ta k e n d i r e c t l y f o r t h e EPA by th e Midwest R ese arch I n s t i t u t e . Energy consum ption fro m t h e 1974 s tu d y They found t h a t a MBCDL would have saved betw een 20 an d 3 0 p e r c e n t o f t h e e n e r g y u s e d by t h e d e l i v e r y sy stem w ith o u t th e l e g i s l a t i o n . More en erg y would be saved i n th e b e e r i n d u s tr y th a n i n s o d a b e c a u s e o f t h e g r e a t e r u s e o f o n e -w a y p a ck ag es f o r b eer. F e d e ra l Energy Admi n i s t r a t i o n S tu d y In 1976 th e F e d e ra l Energy A d m in is tra tio n (FEA) p u b lis h e d "Energy and Economic Im p a c ts o f M andatory D e p o s i t s . T h i s r e p o r t was a u th o re d by T a y le r Bingham o f th e R ese arch T r i a n g l e I n s t i t u t e , EPA r e p o r t d is c u s s e d e a r l i e r . th e F r a n k lin A s s o c ia te s . a s w as t h e 1972 The en erg y a n a l y s i s was s u b - c o n tr a c te d t o The p r i n c i p a l s i n t h a t f ir m c o n d u cte d th e 1974 EPA s t u d y w h i l e e m p lo y e d by o f t h e M id w est R ese arch I n s t i t u t e . T h is r e p o r t fo llo w e d th e p a r t i a l a n a l y s i s fo rm a t p ro p o se d by H annon an d t h e 1974 EPA r e p o r t . A dem and m odel f o r b e e r s a l e s w as d e v e lo p e d u s in g th e r e l a t i v e p r i c e o f b e e r , p e rs o n a l p e r c a p i t a incom e, and th e p o p u la tio n segm ent 20 t o 34 y e a r s o f a g e a s th e p r e d i c t o r v a r i a b l e s . The d e p en d e n t v a r i a b l e was th e p e r c a p i t a b e e r co nsum ption f o r th e t o t a l p o p u la tio n . p e r i o d w as l o n g , The b a s e 1 9 4 7 -1 9 7 3 , and i n c l u d e d b o th p e r io d s o f grow ing and 16 d e c lin in g beer s a le s . An R2 o f .9 5 was a t t a i n e d u s in g lo g g e d form s o f t h e v a r i a b l e s on b o th s i d e s o f th e e q u a t i o n . The p r i c e v a r i a b l e w a s p u t i n t o r e l a t i v e te rm s by d i v i d i n g t h e Consumer P r i c e In d e x (CPI) f o r b e e r a t home by t h e CPI f o r a l l The Incom e v a r i a b l e w a s d e f l a t e d i n t o 1967 d o l l a r s . ite m s. The c r i t e r i a f o r i n c l u s i o n o f tw o m e a s u r e s o f t h e p o p u l a t i o n v a ria b le c o n c e p t u a l l y s im p le , o r a t l e a s t n o t c l a r i f i e d . As a p r e d i c t o r v a r i a b l e t h e p o p u l a t i o n was r e s t r i c t e d t o t h e segment 20 t o 34. sid e o f th e e q u a tio n , p o p u la tio n ) b a s is . w as n o t a s On t h e dep en d en t demand f o r b e e r w as on a p e r c a p i t a (to ta l T o t a l p o p u l a t i o n was a l s o u s e d f o r t h e p e r c a p i t a income f i g u r e s . Demand S ta tistic s v a ria b le s. w as f o r e c a s t f o r t h e p e r i o d p r o je c tio n s w ere used fo r 19 75 -1 98 5. th e Bureau o f Labor p o p u la tio n and in c o m e The p r i c e v a r i a b l e was assumed c o n s t a n t o v e r t h e p r o j e c t e d p e r i o d , a s u r p r i s i n g a s s u m p tio n g iv e n t h a t t h e r e l a t i v e p ric e of beer h a d d e c l i n e d d u r in g a l l o f t h e p r e v io u s 20 y e a r s . D e m a n d was assumed t o drop l e s s t h a n 1 p e r c e n t fr o m p r o j e c t e d l e v e l s u n d e r a MBCDL. Two p a c k a g e m ix s c e n a r i o s w e r e p r e s e n t e d f o r c o m p a r i s o n w i t h t h e b a s e f o r e c a s t w h ic h a ss u m e d no c h a n g e s i n t h e c u r r e n t s y s t e m . s c e n e rio s th e n o n -re f i l l a b l e b o th b o t t l e w as assumed t o have been removed from t h e m arket a n d r e p l a c e d by r e f i l l a b l e d i v i d e d b e tw e e n r e f i l l a b l e In b o ttle p * The m a p k e t w as b o t t l e s and c a n s a s i n th e M ichigan P u b li c S e r v i c e s Commission s t u d y . Two o t h e r , m ajor a s s u m p tio n s w ere m ad e. I t was assumed t h a t t h e consumer e i t h e r p e f e r r e d r e f i l l a b l e b o t t l e s o v e r c o n v e n i e n c e ( o n e - w a y ) p a c k a g e s , o r was i n d i f f e r e n t betw een them. T h is was a s t r o n g a s s u m p tio n g iv e n t h a t o v e r 90 p e r c e n t o f a l l o f f - p r e m i s e b e e r s a l e s , th o s e a f f e c t e d 17 by t h e p r o p o s e d l e g i s l a t i o n , w e re i n c o n v e n ie n c e p a c k a g e s . 1® On t h e s u p p ly s i d e i t was assumed t h a t p ro d u c t p r i c i n g c o uld be m odeled o n t h e b a s i s o f t h e c o m p e t i t i v e p r i c i n g m o d e l ; i . e . , e a c h change i n c o s t a t ev ery le v e l in th e d i s t r i b u t i o n c o n s u m e r . 19 c h a n n e l w o u ld b e p a s s e d on t o The r e s u l t s d e r i v e d fro m t h e th e model r e s t h e a v i l y on th e v a l i d i t y o f t h e s e consumer b e h a v i o r a n d m a r k e t a s s u m p t i o n s . C u rren t c o n t a i n e r p r i c e s a n d e n e r g y e q u i v a l e n t s w ere e n t e r e d i n t o th e m odel, a lo n g w i t h package mix a s s u m p tio n s , t o a r r i v e a t e s t i m a t e s o f d e c r e a s e d r e s o u r c e and e n e r g y u s e a l o n g w i t h i n c r e a s e d em ploym ent and c a p i t a l c o s t s from a n a t i o n a l MBCDL. G e n era l A ccou ntin g O f f i c e S t u d i e s More r e c e n t l y , th e E ffe c ts of ( 1 9 7 7 ) . 20 a N a tio n a l G e n e r a l A c c o u n tin g O f f ic e p u b lis h e d P o t e n t i a l M a n d a t o r y D e p o s i t on B e v e r a g e C o n t a i n e r s . T h i s r e p o r t u p d a t e d t h e FEA model d e s c r i b e d above th ro u g h 1976 and d e v elo p e d p r o j e c t i o n s f o r 1981 and 1985. No change i n consumer demand was assum ed, a l th o u g h t h e r e p o r t re v ie w e d s t u d i e s from b o th MBCDL s t a t e s , Oregon and Vermont, and r e p o r t e d t h a t package s a l e s f e l l i n b o th s t a t e s i n t h e y e a r f o l l o w i n g i m p l e m e n t a t i o n o f MBCDL.21 P r i c e s w ere p r e d i c t e d t o be lo w e r due t o re d u c e d r e s o u r c e and e n e r g y r e q u i r e m e n t s , b u t th e p r e d i c t i o n was n o t e n t e r e d i n t o th e demand m o d e l.22 The G e n e r a l A c c o u n t i n g O f f i c e r e v i s e d t h e i r r e p o r t i n 1980 t o in c lu d e th e e x p e r i e n c e a s s u m p tio n s .2® o f M ic h i g a n an d M ain e i n fo rm in g th e ir S e v e r a l c h a n g e s w e r e made b a s e d p r i m a r i l y o n t h e i r a n a l y s i s o f what happened i n M ichigan f o l l o w i n g i m p l e m e n t a t i o n o f i t s MBCDL. S a le s w e r e now p r e d i c t e d t o re su m in g t h e i r e s t a b l i s h e d t r e n d . s t a g n a t e f o r one y e a r b e f o r e As t h e b a s i s f o r t h a t assu m p tio n th e y 18 h a d f o u n d t h a t t o t a l s a l e s d e c l i n e d i n t h r e e o f t h e f o u r s t a t e s w ith MBCDL (Vermont, Maine, and M ich ig an ) and s t a g n a t e d s a l e s I n t h e f o u r t h ( O r e g o n ) d u r i n g t h e f i r s t y e a r f o ll o w i n g a MBCDL. The e f f e c t on p r i c e s was s a i d t o be i n d e t e r m i n a t e , a s t h e GAO c o u l d d e m o n s t r a t e s a v i n g s i n reso u rce use and e n e rg y b u t c o u ld n o t e x p la in th e o b serv ed p r ic e i n c r e a s e s which th e y fo un d had o c c u r r e d i n t h e t h r e e s t a t e s f o r w h ic h p r i c e d a t a was p r e s e n t e d . A dem an d m od el w as d e v e l o p e d s p e c i f i c a l l y f o r b e e r s a l e s i n M ichigan. The b a se p e r i o d o f 1962-1978 w as c h o s e n . No c l a r i f i c a t i o n was g i v e n f o r u s i n g t h i s s h o r t e r tim e s e r i e s f o r t h e r e g i o n a l model o f M ichigan. A r e g r e s s i o n t e c h n i q u e was u s e d w h ic h c o r r e c t e d f o r s e c o n d o rd er s e r i a l c o r r e l a t i o n t o im p ro v e th e f i t f o r 1978 and 1 9 7 9 .21* The in d e p e n d e n t v a r i a b l e s u sed w e re p e r c a p i t a in c o m e , t h e r e a l n a t i o n a l b e e r p r i c e i n d e x ( a d j u s t e d f o r M ichigan p r i c e s i n 1978 and 1979)» th e p o p u l a t i o n 21 t o 64 e x c e p t f o r t h e y e a r s 1972 t h r o u g h 1978 w hen t h e l o w e r l e g a l d r i n k i n g age was r e f l e c t e d i n t h e c h o ic e o f 18 t o 64 a s t h e p o p u l a t i o n v a r i a b l e , and t h e M ic h i g a n u n e m p lo y m e n t r a t e . says th a t h ig h The r e p o r t i n t e r c o r r e l a t i o n among t h e v a r i a b l e s may make i t d i f f i c u l t to d is tin g u is h th e in d iv id u a l c o n tr ib u tio n o f e a c h v a r i a b l e . H o w e v e r , t h e y a p p e a r t o i g n o r e t h e q u a l i f i e r w hen r e p o r t i n g t h e i r re su lts. A s t a t e d g o a l f o r th e m o d e l w as t h a t t h e v a r i a b l e s s h o u ld be s i g n i f i c a n t a t t h e 0 .9 l e v e l , b u t t h e p o p u l a t i o n v a r i a b l e w a s r e t a i n e d w ith a t - s t a t i s t i c o f 0 .1 5 .2^ I t i s d i f f i c u l t t o u n d e r s ta n d how t h e i r model c o u ld a c c u r a t e l y d e p i c t demand f o r b e e r i n M i c h i g a n w i t h o u t a s i g n i f i c a n t e f f e c t b e i n g a s s i g n e d t o t h e dem ographic v a r i a b l e , which v a r i e d c o n s id e r a b ly d u r i n g t h e p e r i o d . S u b s ta n tia l q u estio n a b o u t th e v a l i d i t y o f t h e r e s u l t s o f t h i s model w ere r a i s e d by W einberg i n 1 9 8 1 . ^ 19 The Wharton Study The m a jo r, W h a r to n S c h o o l a t The U n i v e r s i t y o f P e n n s y lv a n ia co m p leted a I n d u s tr y - s p o n s o r e d s tu d y i n 1 9 7 6 .2^ l e g i s l a t i o n had b e e n p a s s e d i n c o n ta in e rs. The s t u d y a ss u m e d t h a t 1969 b a n n i n g n o n - r e f i l l a b l e b e v e r a g e T h i s s i m p l i f i e d t h e n e c e s s a r y c o n t a i n e r mix a s s u m p tio n s , b u t a l s o l e d t o l a r g e r im p a c t s t h a n w o u ld h a v e b e e n e x p e c t e d u n d e r a MBCDL. U s in g t h e W h arto n E co n o m etric Model, im p a c ts o f t h e l e g i s l a t i o n w ere p r o j e c t e d th ro u g h 1974, which a llow ed c o m p a riso n w i t h a c t u a l d a t a fo r th o se y e a r s . b e v e ra g e f i l l i n g The m o d e l p r e d i c t e d a d e c l i n e i n c o n t a i n e r c o s t p e r (a s d i d numerous o t h e r s t u d i e s ) . H o w ev e r, f o l l o w i n g t h e i m p a c t s t h r o u g h t h e d i s t r i b u t i o n c h a n n e l and assum ing t h a t p r i c e e q u a l s t h e c o s t o f goods s o l d p l u s a c o n s t a n t p e r c e n t markup, t h e m od el p r e d i c t e d a n i n c r e a s e i n consumer p r i c e s . 2** T h i s was due t o i n c r e a s e d h a n d lin g c o s t s , re d u c e d demand, d e p r e c i a t i o n o f c a p i t a l e x p e n d i t u r e s , and u n c l a i m e d d e p o s i t s . A p r i c e e l a s t i c i t y o f demand e q u a l t o 0 .6 was assumed i n a r r i v i n g a t t h e f o r e c a s t o f lo w e r demand. L i t t e r and s o l i d w a ste w ere e x p e c te d t o d e c l i n e , w h ile i n c r e a s e d h a n d lin g would l e a d t o a n e t g a i n i n employment. An en erg y a n a l y s i s was made by t h e W harton s tu d y w ith 1974 a s th e base y e a r . The summary o f p r i o r work i n t h i s s tu d y was e x c e l l e n t . 29 A 40 t o 50 p e r c e n t en erg y s a v i n g s i n t h e d e l i v e r y s y s t e m was p r o j e c t e d . The r e p o r t c a u ti o n e d t h a t t h i s was l e s s th a n one h a l f o f one p e r c e n t th e t o t a l U.S. e n e rg y consum ption and t h a t t h e l e g i s l a t i o n would have l i t t l e e f f e c t on t h e consum p tio n o f o i l based r e s o u r c e s . 3° O th e r s t u d i e s o f t h e i m p a c t o f c o n t a i n e r l e g i s l a t i o n on energy u se re a c h e d s i m i l a r c o n c l u s i o n s . use f o r a r e f i l l a b l e - o n l y The B a t t e l l e ( 1 9 78 ) m o d e l o f e n e r g y b e v e r a g e i n d u s t r y , u s e d 1976 a s t h e base 20 y e a r . The r e p o r t showed t h e en ergy s a v in g s from c o n t a i n e r l e g i s l a t i o n a c c r u in g to p l e n t i f u l e n e rg y r e s o u r c e s w h ile p e tro le u m b a se d f u e l r e q u ir e m e n ts m ig h t e v e n i n c r e a s e . A 19 82 s t u d y by t h e F r a n k l i n A s s o c i a t e s f o r A lcoa C o r p o r a tio n was an u p d a te o f t h e i r e a r l i e r s t u d i e s f o r t h e government. 32 re s u lts w ere A lthough some o f t h e s p e c i f i c v a l u e s changed, th e co n g ru o u s w ith th o se in th e 1976 F e d e r a l E n e r g y A d m i n i s t r a t i o n s tu d y . F in a lly , "a stu d y T e c h n o lo g y A s s e s s m e n t i n of stu d ie s" w as d o n e by t h e O ffic e of 1979 f o u n d a g r e e m e n t a m o n g p r o p o n e n t s , o p p o n e n t s , and n e u t r a l p a r t i e s t h a t a MBCDL would a cc o m p lish a l l o f i t s m a j o r g o a l s t o some d e g r e e . 33 These w e re enum erated a s a r e d u c t i o n i n l i t t e r , m u n ic ip a l s o l i d w a s te , e n e rg y consum ption, and r e s o u r c e u s e , a s w e l l a s s e r v i n g a s a symbol o f commitment t o r e s o u r c e c o n s e r v a t i o n . The r e p o r t th e n q u a l i f i e d t h e p o s i t i v e e f f e c t s a s b e i n g s m a l l o n a m acro le v e l. D isag reem en t among t h e v a r i o u s s t u d i e s was found o n t h e im p o r ta n t i s s u e s o f t h e e f f e c t o f a MBCDL on p r i c e s and consumer dem and.3^ The o f t e n - s i t e d p r e d i c t i o n o f d e c l i n i n g b e v e ra g e p r i c e s w as f o u n d t o h i n g e on t h e a s s u m p t i o n o f a p e r f e c t l y c o m p e t i t i v e m a r k e t . W ith o u t t h a t a ssu m p tio n t h e e f f e c t on p r i c e s was fou nd t o be i n d e t e r m i n a t e . Demand would be a f f e c t e d by b o th change i n p ro d u c t p r i c e and p o s s i b l e change i n consum er p u r c h a s e p a t t e r n s d ue t o t h e d i s a p p e a r a n c e o f c o n v e n i e n c e packages fo r b ev erag es. Many s t u d i e s a ss u m e d t h a t consum ers e i t h e r p r e f e r r e d r e f i l l a b l e c o n t a i n e r s o r w ere i n d i f f e r e n t t o t h e c h o i c e . In d u stry a n a l y s t W einberg p ro p o se d t h a t dem ographic f a c t o r s w ere n o t s u f f i c i e n t f o r m o d e l i n g b e v e r a g e c o n s u m p t i o n . 35 F o r t h e p e r io d 1 9 4 7 - 1 9 6 9 a h ig h d e g re e o f a s s o c i a t i o n was found betw een i n c r e a s i n g b e e r 21 s a l e s and t h e i n c r e a s e i n one-w ay ( n o n - r e f i l l a b l e ) p a ck a g in g u sed f o r beverages. The i m p l i c a t i o n was t h a t c o n v en ience p a c k a g i n g c r e a t e d new m a rk e ts f o r th e p r o d u c t. E lse w h ere, he c a u tio n e d a g a i n s t th e a ssu m p tio n t h a t c u r r e n t m arket p r i c e s f o r b e e r i n r e f i l l a b l e and n o n - r e f i l l a b l e p a c k a g e s d i d n o t a c c u r a t e l y r e f l e c t th e u n d e r ly in g c o s t s t r u c t u r e s . 36 H is h i s t o r i c a l a n a l y s i s o f p r i c i n g show ed b e e r i n n o n - r e f i l l a b l e c o n t a i n e r s t o be s u b s i d i z i n g t h e p r o d u c t i n r e f i l l a b l e b o t t l e s , which would n o t be p o s s i b l e i n a r e f i l l a b l e o n ly system . M ichigan S t u d i e s S ev eral s t u d i e s h a v e b e en p u b lis h e d a n a ly s in g v a r i o u s a s p e c t s o f t h e M ic h ig a n MBCDL. p u b lish e d a stu d y , A j o i n t c o m m itte e o f t h e M ic h i g a n l e g i s l a t u r e a nd t h e n an u p d a t e , b a s e d on s t a f f r e s e a r c h and p u b l i c h e a r in g s a d d r e s s i n g th e im p a c ts o f t h e la w .37 The com m ittee a l s o c o m m is s io n e d a m a j o r s t u d y o f t h e l a w ' s s p e c i f i c e f f e c t on l i t t e r . 38 The committee found b ro a d , c o n t i n u i n g p o p u l a r s u p p o r t f o r t h e p o l i c y . L i t t e r r e d u c t i o n was i d e n t i f i e d by t h e l e g i s l a t i v e committee a s t h e m ajo r p o l i c y g o a l . The i m p a c t o f t h e MBCDL on l i t t e r , m ix e d . h o w e v e r , was B everage c o n t a i n e r l i t t e r was down 85 p e r c e n t , b u t t o t a l l i t t e r w as f o u n d t o be up a l m o s t 10 p e r c e n t i n a b e f o r e and a f t e r s t u d y . 39 M u n icip al s o l i d w a ste was re d u c ed b e ca u se n e a r l y a l l b e v erag e c o n t a i n e r s w e re r e p o r t e d t o be e i t h e r r e u s e d o r r e c y c l e d . P r i c e s were found to have i n c r e a s e d n o t i c e a b l y f o r b e v e r a g e s a n d n o e x p l a n a t i o n c o u l d b e found w ith in th e re c e iv e d th e o ry ( p e r f e c tly consumer i n d i f f e r e n c e t o c o n ta in e r ty p e ). s a le s in b o rd er a re a s o f th e s t a t e s t a t e s was d i s c u s s e d . c o m p e t itiv e m a rk e ts and D is lo c a tio n s o f beverage t o r e t a i l o u t l e t s i n n e ig h b o r in g R easons f o r d e c l i n i n g b o r d e r a r e a s a l e s i n c l u d e d 22 M ic h i g a n p r i c e i n c r e a s e s , t h e r a i s i n g o f t h e l e g a l minimum d r i n k i n g age i n M ichigan and t h e absen ce o f con v en ie n c e p a ck a g e s i n M ichigan. Change i n t h e b e v e r a g e d e l i v e r y system d u r in g t h e f i r s t 6 months a f t e r t h e M ic h i g a n MBCDL to o k e f f e c t was d e s c r i b e d by S j o l a n d e r . ^ compared one m a rk e t a r e a ( F lin t, M ich ig an ) w ith a s i m i l a r I n d i a n a d u r in g t h a t t r a n s i t i o n a r y p erio d . He c ity in A second d e s c r i p t i v e r e p o r t by S h a rk e y i n c lu d e d many i n t e r v i e w s from e a c h s e g m e n t o f t h e a f f e c t e d i n d u s t r y . ^2 A summary o f t h e i s s u e s i n M ichigan was p ro v id e d by K i r b y .**3 argu m en ts b o th f o r and a g a i n s t MBCDL w e re i d e n t i f i e d . The The p o l i c y w as a n a ly s e d i n te rm s o f p r o p e r t y r i g h t s a s s ig n m e n ts and shown a s a t r a n s f e r o f r i g h t s t o c e r t a i n a s p e c t s o f t h e e n v iro n m e n t away f r o m t h e b e v e r a g e l i t t e r e r s and t o th o s e d e s i r i n g a b e v e ra g e c o n t a i n e r f r e e e n v iro n m e n t. The M ic h i g a n U n ite d C o n s e r v a tio n Clubs (MUCC) p u b l i s h e d a r e p o r t w h ic h c l e a r l y p o sitio n . ^ s t a t e d t h e r e s u l t s o f t h e p o l i c y fro m a n a d v o c a t e ' s The MUCC a c t i v e l y l o b b ie d f o r p a s s a g e o f t h e l e g i s l a t i o n and c o n s id e r e d i t an u n q u a l i f i e d s u c c e s s . re d u c e d l i t t e r , s o l i d w a s te and P o rter T h ey f o u n d t h a t t h e MBCDL en co u rag e d r e s o u r c e c o n s e r v a t i o n . b ro u g h t to g e th e r b e n e f its ( r e d u c e d l i t t e r , s o l i d w a s te , and r e s o u r c e u s e ) w ith c o s t s ( l o s s o f consumer c o n v e n i e n c e a nd h i g h e r b e v e ra g e p r i c e s ) i n t o an o v e r a l l w e l f a r e a s s e s s m e n t . ^ The a n a l y s i s was made b a s e d on d a t a f o r one y e a r b e f o r e and a f t e r t h e M i c h i g a n la w w as im p le m e n te d . An a t t e m p t w as made t o m o d e l t h e i n c o n v e n i e n c e c o s t e x p e r i e n c e d by c o n s u m e r s i n r e t u r n i n g c o n t a i n e r s . T h a t f i g u r e w as c o m b in e d w ith th e t o t a l i n c r e a s e i n t h e nominal p ro d u c t p r i c e t o d e r i v e b e v e ra g e consumer w e l f a r e l o s s e s ( c o s t s ) due t o m a n d ato ry d e p o s i t s , e s t i m a t e d betw een 67 and 107 m i l l i o n d o l l a r s f o r b e e r i n 1 9 7 9 .1*® 23 Crosby, G ill, and T a y lo r i d e n t if i e d w hat th e y c a lle d an e c o l o g i c a l m arket s e g m e n t i n M i c h i g a n b a s e d on a s u r v e y o f c o n s u m e r a ttitu d e s to w a rd MBCDL* 47 T hey f o u n d a h i g h c o r r e l a t i o n b e tw e e n a re s p o n d e n ts c o n cern f o r p r o t e c t i n g th e e n v iro n m e n t and e x p r e s s e d p r e f e r e n c e b e f o r e t h e 1976 re fe re n d u m on t h e MBCDL i n M ichigan. A much s t r o n g e r r e l a t i o n s h i p was found betw een t h e r e s p o n d e n t s b e l i e f on t h e effect of th e p r o p o s e d law on b e v e r a g e p r i c e s and p l a n n e d v o t i n g b e h a v i o r a c c o r d i n g t o t h e i r d a t a . 48 U n f o r t u n a te ly f o r t h e p u rp o s e s o f t h e p r e s e n t s t u d y , t h e r e s e a r c h e r s w e re c o n c e r n e d w i t h p r e s e n t i n g a m o d el o f e c o l o g i c a l b e h a v i o r and n o t w ith d e v e lo p in g t h e r e l a t i o n s h i p betw een consumer e x p e c t a t i o n s o f p r i c e e f f e c t s and v o t i n g b e h a v io r . The p r e s e n t s tu d y h a s e x p l i c i t l y a n a ly s e d economic e f f e c t s o f th e M ichigan MBCDL p o l i c y . F iv e y e a r s o f e x p e r ie n c e w ith b o th c o n su m e r a nd b e v e ra g e in d u s try a d a p ta tio n s to l i f e under t h i s a v a ila b le fo r a n a ly s is . l e g i s l a t i o n w e re Two o f t h e M ichigan demand m o d e ls a r e s i m i l a r t o th e one d ev eloped hy Bingham i n t h e F e d e r a l Energy Agency s tu d y . The t h i r d demand model, u s i n g r e g i o n a l s a l e s t o p r e d i c t M ichigan s a l e s i s l o g i c a l e x t e n s i o n o f t h e ( a l l o t h e r t h i n g s b e in g e q u a l) a ss u m p tio n . a The b o r d e r a r e a s a l e s a n a l y s i s i s an a t t e m p t t o q u a n t i f y t h e e f f e c t n o te d by t h e S p e c i a l J o i n t C o m m itte e o f t h e M ichigan L e g i s l a t u r e . The package mix a n a l y s i s i s an e x t e n s i o n o f t h e work r e p o r t e d by t h e M ichigan P u b li c S e r v i c e s Commission i n M ichigan and Gudger and B a i le e i n Oregon. U sing t h e a c t u a l package mix t o e s t i m a t e th e e f f e c t o f MBCDL i s a r e f i n e m e n t o f t h e v a r i o u s energ y s t u d i e s which u se d assumed package mixes due t o a la c k o f a c t u a l d a t a . The a n a l y s i s o f p r i c e s i s a n e x t e n s i o n o f t h e e a r l i e r s tu d y by S j o l a n d e r . 24 E ndnotes 1. Taylor H.Bin^iam and P a u l M u llig a n , The B everage Container Problem. Research Triangle I n stitu te , Research Triangle .Park, NU., fo r The Environm ental P r o te c tio n Agency (Washington, D.C.: Government P rinting O ffice, September 1972). 2. Ib id ., p. 6 3* Bruce M. Hannon, "Bottles Cans Energy," No. 2 (March, 1972): 11-21. E n vironm ent .V o l. 14, 4. Bruce Hannon, "System Energy and R e c y c lin g : A Study o f t h e Beverage In d u stry ." Report Number 23 (Urbarmt-Champaign, IL .: Center for Advanced Computation, U niversity of I l l i n o i s , 17 March 1973). 5. R o b erts. Weinberg andA ssociates, " L e t t e r t o H. B . K in g Reviewing RTI/EPA Study, "Energy and Economic Impacts o f Mandatory D e p o s its ," in R eference Source Book, Chapter 5 (Washington, D.C.: U.S. Brewers A ssociation). 6. Charles M. Gudger and Jack C. B a ile s , The Economic Impact o f Oregon* s "Bottle B i l l (C om vallis, Oregon: The Oregon State un iversity w e s s , i9 7 4 ), p. 2. 7. I b id ., , p. 11. 8. Ib id ., P. 17 and 64. 9. Robert G. Hunt, and William E.Franklin,R e s o u r c e and E n v ir o n m e n t a l A n a l y s i s o f N in e B ev era g e C o n ta in e r A i t e r n a t i v e s , prepared ror The Environmental P r o te c tio n Agency by th e Midwest Research I n stitu te (Washington, D.C.: Government P rinting O ffice, EPA-350-SW-91C, 1974). 10. Michigan Department o f Commerce, Public Services Commission, An Economic Analysis of Energy and Employment E ffects o f Deposit R eg u la tio n o f N on -kefillable Beverage Containers in Michigan CLansingT'm T : MPSIT S ta ff Stu^"T97g-3, 3 October "1975)T 11. I b id ., p. 426-432. 12. Ib id ., p. 267. 13. Ib id ., p. 220. 14. Ib id ., p. 422. 15. Ib id ., p. 270-290. 25 16. Taylor H. Bingham, e t . a l . , Energy and Economic Impacts o f Mandatory D e p o sits,. Research T rian gle I n s tit u t e , Research T r ia n g le P ark , N orth C a r o lin a , fo r th e F ed eral Energy Administrtion (Washington, D.C.: Government P rin tin g O ffic e , NTIS, PB-258-638 September 1976). 17. Ib id ., appendix 2. 18. Robert S. Weinberg and A ssociates, "Working Paper: The Economics o f the Malt Beverage P ro d u ctio n /D istrib u tio n System , 1976 " (S t. Luois: R. S. Weinberg and A ssociates, 8 August 1978), p. A-2. and Richard Sjolander, "The Economic E ffe c ts o f th e Michigan Beverage Container Law on a Package Sjystem," Special Report No. 15 (E^st Lansing, MI.: Michigan State U niversity. School o f Packaging, 31 May 1979), p. 13. 19- Bingham, Energy and Economic Impacts o f Mandatory D eposits, p.50. 20. General Accounting O f f i c e , P o t e n t i a l E f f e c t s o f a NationalMandatory Deposit on Beverage Containers (Washington. 57577 Government P r in tin g O ffic e report no. PAD 78-19, 11 December 1977). 21. Ib id ., p. 12. and Appendices 1 and 2. 22. Ib id ., p. 41. 23. General Accounting O ffice, S t a t e ' s E x p e r ie n c e With B everage , C ontainer D ep o sit Laws'Shows P o sitiv e B enefits (.Washington, ’u . c . : Government P r in tin g O ffic e report no. PAD 81-08, 11 December 1980). 24. I b id ., p. 60. U sin g th e s t a t i s t i c a l tech n iq u e o f lagging the independent variables tw ice minimized the d ifferen ce between actual and predicted sa le s in 1979* 25. Ib id ., p. 66. 26. Robert S.W einberg, "Memorandum on O ffic e (GAO) Report: State E xperience With Beverage C o n ta in e r D e p o s it Laws Shows P o s it iv e B e n e fits (PAD-81- 0 8 ) ," (St. Louis: R.S. Weinberg and A ssociates, 6 March 1981), (Mimeographed.) 27. Busch Center, The Wharton School, U n iv e r sity o f Pennsylvania, A Study o f th e impacts on the USA o f a Ban on One-Way Beverage C on tain ers 2 v o le, prepared for th e tf.S. Brewers A ssociation (Washington, D.C.: US Brewers A ssociation December 1976). 28. I b id ., p. 28. 29. Ib id ., v o l. 2, Appendix A. 30. Ib id ., v o l. 2, p. 9« * 26 31. B a t t e l l e L a b o r a t o r i e s , E v a l u a t i o n o f E n e rg y Consumed i n U sin g . R e f i l l a b l e g l a s s B o t t l e s ana Cans f o r B eer ana S o r t Drintcs, r e p o r t t o Can M anufacturers i n s t i t u t e (Columbus, Ohio: S a tte lle C o lu m b u s D iv is io n , June 1978). 32. W illiam L. B i d e r a n d R o b e r t G. Hunt, Comparative Energy Im pacts A s s o c i a t e d w i t h t h e D e l i v e r y o f B ev erag e in E ig h t S i n g l e - s e r v i n g C o n t a i n e r s , p re p a re d f o r The Aluminum Company o f A m e ric a py F r a n k l i n " S s s o c i a t e s , L t d . , 25 J a n u a r y , 1982. (Mimeographed.) 33- O ffice of Technology Assessment, M a t e r i a l s and E n e r g y from Municipal Waste (Washington, D .U .: (ioverment P rinting O f f i c e report OTA-M-93, 1979), p. 235. 34. I b id ., p 225. 35. Robert S.W einberg and A s s o c ia te s , "The E ffects of Convenience Packaging on the Malt Beverage Industry, 1947-1969 (December 1,1971)" in R eference Source Book, Chapter 1 (Washington, D.C.: U.S. Brewers A ssociation). 36. Ibid. 37. Michigan L egislature, Special J o in t Committee to Study the Impact o f the Beverage Container Deposit Law.Michigan's Deposit Law; E i r s t Y ear, an in terim rep ort (Lansing, Ml, December 4 , l9V 9). and t h e ir f i n a l report, Michigan Deposit Law: Second Year (Lansing, MI, December 1980). 38. Danial B. Syrek, Michigan L itter: After , Report ty the In stitu te fo r Applied Research to The S p e c ia l J o in t Committee o f th e M ichigan L e g is la tu r e t o Study th e Impact o f th e Beverage Container Deposit Law, (Sacramento, CA., 28 February 1980). 39* Michigan L egislature, Special J o in t Committee to Study the Impact o f the Beverage Container Deposit Law,Michigan's Deposit Law: Second Year, p. 12. 40. Ib id ., p. 25-27. 41. Sjolander, "The Econom ic E f f e c t s o f t h e M ich igan B ev era g e Container Law on a Package System," 42. Leo Sharkey, "The M ichigan E xperience," B ev era g e World, November 1979, p. 34-39, 43, 44, 49, 50, 52, 56, 58, 60, 7343. Carolyn R. K irby, "The Beverage Container Issu e : A Study of Mandatory D e p o s it L e g i s l a t i o n w ith R e s p e c t . t o N o n r e t u r n a b l e P a c k a g in g m t h e B re w in g I n d u s t r y " (R esearch R e p o rt, Michigan State U niversity, 1979)* 27 44. B a rb a ra Grabcw ski, The M ichigan B o t t l e B i l l : O n e Y e a r A f t e r ( L a n s i n g , M I : M i c h i g a n U n i t e d C o n s e r v a t i o n C lubs, F e b ru a ry 1980). 45. R ic h ard C. P o r t e r , " M ic h ig a n 's E x p e rie n c e w i t h Mandatory D e p o s its o f B e v e r a g e C o n t a i n e r s , " L and Economics V o l . 59* No. 2 (May 1 985), p. 177-194. ------------------------- 46. I b i d . , p . 189. 47. Lawrence A.Crosby, James D. G i l l , a n d J a m e s R . T a y l o r , " C o n s u m e r /V o te r B e h a v i o r i n t h e P a s s a g e o f t h e M i c h i g a n C o n t a i n e r Law". J o u r n a l o f M ark etin g ,V o l. 4 5 ( S p rin g 1981), p . 19-32. ------------------------------- 48. I b i d . , p . 28 (T ab le 6 ). CHAPTER III ** Methods and Results D e p o s i t s on c o n t a i n e r s f o r most e a r b o n a t e d b e v e r a g e s ( b e e r and s o f t d r i n k s ) h a v e b e e n r e q u i r e d by M ic h ig a n la w s i n c e December 3 , 1 9 7 8 .1 T h is p u b l i c p o l i c y i s meant t o g iv e s p e c i a l p r o t e c t i o n t o c o n s u m e rs and n a t u r a l r e s o u r c e s by e l i m i n a t i n g n o n - r e t u r n a b l e b e v e ra g e c o n t a i n e r s . E ig h t o t h e r s t a t e s h av e co m parable l e g i s l a t i o n (Oregon, V erm o n t, M a in e , I o w a , C o n n e c t i c u t , M a s s a c h u s e tts , D elaw are, and New Y o rk ). M ichigan i s th e o n ly s t a t e , how ever, t h a t oombines a l a r g e p o p u l a t i o n , a n i n d u s t r i a l eco n o m ic b a s e , le g is la tio n . and s e v e r a l y e a r s o f e x p e r i e n c e u n d e r t h i s T h e r e f o r e , M io h ig a n p r o v i d e s a n i m p o r t a n t ty p e o f case fo r s tu d y i n g t h e r e s u l t s o f m andatory d e p o s i t l e g i s l a t i o n . P r i o r t o e n a c tm e n t o f th e M iohigan d e p o s i t law , p r o p o n e n ts c l a i m e d t h e p o l i o y w o u ld b r i n g s u c h b e n e f i t s a s e n e r g y c o n s e r v a t i o n , l i t t e r r e d u c t i o n , s o l i d w a s te r e d u c t i o n , and th e p ro m o tio n o f an e n v i r o n m e n t a l e th ic . In beverage o o n tra st, sa le s, o p p o n e n ts e x p re s s e d o o n cern a b o u t d e c l i n i n g in c re a s e d la b o r c o sts, and th e added cost of u n p r o d u c t i v e s p a c e f o r s t o r i n g t h e empty c o n t a i n e r s , which was s e e n as th e c o s t o f any b e n e f i t s . Most o f t h e s e e x p e c t a t i o n s w e re b a se d on t h e o r e t i c a l p r o j e c t i o n s and m e a g e r d a t a . S i n c e M ic h i g a n c o n s u m e r s h a v e now l i v e d w i t h t h e p o lic y fiv e fo r over y ears, s ig n ific a n t p a t t e r n s o f b e h a v i o r by consum ers and i n d u s t r y h a v e b e e n e s t a b l i s h e d . M ich ig an e x p e r i e n c e , D o c u m en ta tio n o f th e t h e r e f o r e , s h o u ld be o f v a lu e t o o t h e r s t a t e s and t h e f e d e r a l governm ent a s th e y c o n s i d e r s i m i l a r la w s . The i n d u s t r y a f f e c t e d by t h i s l e g i s l a t i o n i s l a r g e . a lo n e i n M iohigan a m o u n te d t o 2 . 3 b i l l i o n c o n ta in e rs in Beer s a l e s 1978. Soda ( c a r b o n a t e d s o f t d r i n k ) s a l e s w ere e s t i m a t e d t o be a b o u t e q u a l t o t h i s fig u re . pu rch ase The M ic h ig a n L i q u o r C o n t r o l C o m m is sio n c a l c u l a t e d t h a t th e o f b e e r c o n su m e d m ore t h a n 1 . 5 p e r c e n t o f t h e S t a t e ' s b i l l i o n d o l l a r s o f d i s p o s a b l e income i n 1982, o r $ 1 .4 b i l l i o n . 90 Assuming s o d a p r i c e s a r e s i m i l a r t o b e e r , t h e a f f e c t e d i n d u s t r y a c c o u n te d f o r a t o t a l o f a b o u t 3 p e r c e n t o f d i s p o s a b l e income i n 1982. This chapter was p re viou sly published a s , "Effects of Michigan's Mandatory Beverage Container Deposit Law," by Richard Sjolander and Peter Kakela. RDR-84-1, East Lansing, MI: Agricultural Experiment S tati on Journal A r t i c l e No. 11158, 1984. 00 29 Scope o f This Study The M ic h ig a n law c o v e r s most c a rb o n a te d d r in k s — s o d a , w a te r , and m a lt b e v e r a g e s . - The M ichigan L iq u o r C o n tr o l Commission r e c e i v e s a c o p y o f e v e r y i n v o i c e f o r s h i p m e n t s o f b e e r i n t o and w i t h i n t h e s t a t e i n o rd e r to c o lle c t sta te ta x e s on a l c o h o l . These reco rd s com prehensive, a c c u r a t e , and p r o v id e a n e x c e l l e n t d a t a b a s e . o n ly b e e r i s a n a l y z e d i n t h i s stu d y . are T herefore, T h e r e i s no c o m p a r a b l e t a x on so d a, and s a l e s r e c o r d s a r e t h e p r o p e r t y o f each i n d i v i d u a l b o t t l e r . S o c i a l s c i e n c e r e s e a r c h i s c o m p l i c a t e d by t h e l i m i t e d a b i l i t y of t h e r e s e a r c h e r t o c o n t r o l c o n d i t i o n s i n t h e e n v ir o n m e n t i n o r d e r to i s o l a t e a s i n g l e , u n c o n t r o l l e d v a r i a b l e f o r s tu d y . no e x c e p t io n . The p r e s e n t w ork i s At t h e same tim e a s t h e M ic h ig a n M a n d a to r y B ev e ra g e C o n ta in e r D e p o sit Law (MBCDL) becam e e f f e c t i v e , a n o t h e r m a j o r p o l i c y r e l a t e d t o b e e r consum ption was im plem ented. M ic h ig a n 's l e g a l d r i n k i n g age was r a i s e d from 18 t o 21 y e a r s o f age oil December 2 3 , 1978.2 I n a d d i t i o n t o t h e s e two d i s c r e t e p u b l i c p o l i c y c h a n g e s, tw o o t h e r g r a d u a l c h a n g e s w e re o c c u r r i n g i n M i c h i g a n t h a t may have i n f l u e n c e d consumer b e h a v io r r e l a t e d t o b e v e ra g e consum ption. b eer ro se s u b s ta n tia lly de clin ed . F i r s t , th e p r ic e of a f t e r i m p l e m e n t a t i o n o f t h e MBCDL, and th e n Second, t h e M ich ig an econongr, g e n e r a l l y more v o l a t i l e th a n t h e n a t i o n a l economy, e x p e r ie n c e d two r e c e s s i o n s i n th e l a s t f i v e y e a r s . A ll f o u r o f t h e s e c han ges o c c u r r e d c o n c u r r e n t l y . are fo u r re la te d T h erefo re, th e re v a r i a b l e s t h a t c o u ld have changed M ich ig an b e e r c o n su m p tio n p a t t e r n s s i g n i f i c a n t l y . These have a l l b een c a r e f u l l y c o n s id e re d i n t h e p r e s e n t s tu d y i n an e f f o r t t o i s o l a t e t h e i n f l u e n c e o f t h e t a r g e t v a r i a b l e , t h e MBCDL, on b e e r s a l e s . T h is r e p o r t a n a ly z e s f i v e e le m e n ts o f th e b ev erag e d e l i v e r y system t h a t may have changed a s a r e s u l t o f t h e M ic h i g a n M a n d a to r y B e v e r a g e C o n ta in e r D e p o s it Law. These a r e : 1) t o t a l M ichigan b e e r s a l e s , - 2) M ichigan b o r d e r co u n ty b e e r s a l e s , 30 3) package m ix by c o n ta in e r ty p e , re filla b le b o ttle s, n o n - r e f i l l a b l e b o t t l e s and c a n s , 4) e n e rg y consumed i n M ic h ig a n 's b e e r d i s t r i b u t i o n sy ste m , and 5) beer p ric e s. T h e s e c h a n g e s w e re s t u d i e d and t h e d e g r e e o f i n f l u e n c e t h a t t h e MBCDL h ad on a l l f i v e i s d e s o r ib e d below . There a r e many o t h e r c h a n g e s t h a t h a v e b e e n a t t r i b u t e d t o m a n d a t o r y b e v e r a g e c o n t a i n e r d e p o s i t law s i n g e n e r a l , and s p e c i f i c a l l y t o t h e r e s u l t s o f t h e M ic h i g a n l a w , t h a t a r e n o t d i s c u s s e d i n th e p r e s e n t r e p o r t . M o s t p r o p o n e n t s a n d o p p o n e n t s a g r e e t h a t a MBCDL w i l l r e d u c e beverage r e l a t e d l i t t e r a n d t h a t i t w i l l r e d u c e s o l i d w a s t e by t h e num ber o f a d d i t i o n a l c o n t a i n e r s b e in g r e u s e d o r r e c y c l e d a s a r e s u l t of t h e la w . The i s s u e i s th e c o s t o f t h e s e and o t h e r b e n e f i t s . vT h e a n a l y s i s c o n t a i n e d i n t h i s r e p o r t s p e c i f i c a l l y a d d r e s s e s some o f t h e c h an g e s i n th e b e v e ra g e d e l i v e r y sy ste m . th e v a rio u s s e c to r s , O th e r s , su ch a s em p loy m en t i n l a b o r p r o d u c t i v i t y i n b re w eries or th e s p e c if ic c h an g e s i n l i t t e r and s o l i d w a s te a r e n o t a n a ly z e d . A lt h o u g h t h e r e i s g e n e r a l a g r e e m e n t among p r o p o n e n t s a n d o p p o n e n t s on a number o f t h e e f f e c t s o f s u c h l e g i s l a t i o n s u c h a s t h e r e d u c t i o n i n t h e am ount o f beverage r e l a t e d l i t t e r and s o l i d w a s te , a r e d u c t i o n i n t h e number o f w o rk e rs employed f a b r i c a t i n g b e v e ra g e c o n t a i n e r s and an i n c r e a s e i n t h e num ber o f w o r k e r s s o r t i n g r e t u r n e d p a c k a g e s , a g re e m e n t h a s n o t been re a c h e d a s t o th e r e l a t i v e im p o rta n c e o f t h e s e i m p a c t s o r t h e o v e r a l l c o s t o f s u p p ly in g b e v e r a g e s i n an a l l r e t u r n a b l e package mix. The M ichigan Mandato r y B everage C o n ta in e r D e p o s it Law The MBCDL a p p l i e s t o c a r b o n a te d b e v e r a g e s (s o d a , w a t e r , and b e e r ) i n b o t t l e s and c an s c o n t a i n i n g l e s s th a n one g a l l o n o f p r o d u c t. n o n - r e t u r n a b l e c o n t a i n e r s and d e ta c h a b le p u l l t a b s on c a n s . I t b an s A ll e x c e p t s p e c i a l l y exempted c o n t a i n e r s must be c l e a r l y p r i n t e d w i t h t h e name o f th e s t a t e and t h e r e f u n d v a l u e . c e rtifie d b o t t l e s a n d 10 c e n t s " c e rtifie d ," The minimum d e p o s i t i s on a l l o th e r 5 c e n t s on c o n ta in e rs. To b e a b o t t l e m u s t be a c c e p t e d and r e u s a b l e by more th a n one m a n u f a c tu r e r , and ap proved by t h e M ic h ig a n L i q u o r C o n t r o l C o m m is sio n . For o n -p rem ise s a l e s i n ta v e r n s o r r e s t a u r a n t s , c o n t a i n e r s m ust be 31 p r o p e r l y l a b e l e d , b u t t h e d e p o s i t by, and r e f u n d t o , th e custom er i s n o t re q u ire d . B o th r e t a i l e r s a n d w h o l e s a l e r s a r e r e q u i r e d t o g iv e c a s h re fu n d s f o r any c o n t a i n e r o f a ty p e th e y s e l l . d e p o s i t on a l l c o n t a i n e r s . c o n tain ers. W h o le s a le r s c h arg e r e t a i l e r s th e B rew ers a r e not r e q u i r e d by law t o re fu n d C u r r e n tly b re w e r s i n i t i a t e t h e d e p o s i t o n l y o n r e f i l l a b l e c o n ta in e rs. N o n -re filla b le b o ttle s a n d c a n s a r e d i s p o s e d o f by w h o l e s a l e r s f o r th e s c r a p v a l u e . STATE-WIDE BEER SALES Volume o f B eer S a le s The M ichigan L iqu or C o n tro l Commission c o l l e c t s b e e r s a l e s d a t a f o r ta x p u rp o ses b a s e d o n s h i p m e n t s fro m b r e w e r s t o w h o l e s a l e r s . 3 The tr e n d i n b e e r consum ption i n M ichigan o v e r t h e l a s t t h i r t y y e a r s a p p e a rs to f i t i n t o t h r e e p h a se s (F ig u re 1). The f i r s t phase i s from 1954 t o 1963 and i s c h a r a c t e r i z e d by s a l e s f l u c t u a t i n g a r o u n d a mean v a l u e o f 5 .2 3 7 .0 0 0 b a r r e ls per y e a r. The t r e n d l i n e f o r t h i s p e r i o d h a s a s l i g h t l y n e g a t i v e s lo p e o f - 1 2 ,0 0 0 b a r r e l s p e r y e a r . The s e c o n d p h a s e r u n s fr o m 1963 t h r o u g h 1978. A p o s i t i v e tre n d l i n e f o r t h i s p e rio d p r e d i c t s a g a i n o f 142,000 b a r r e l s p e r y e a r and i s re la te d to 99 p e r c e n t o f t h e v a r i a t i o n d u r in g t h e 15 y e a r s . m id d le o f th e p e rio d (Ja n u a ry 1, Near th e 1972) t h e l e g a l d r i n k i n g a g e w a s lo w ered t o 18 y e a r s o f a g e . 1* The l e g a l d r i n k i n g p o p u l a t i o n i n c r e a s e d by 60 0 .0 0 0 p e o p le ( o r 11 p e r c e n t ) f o r t h a t y e a r . The t h i r d phase b e g in s i n 1979 and r u n s th ro u g h 1983, t h e l a s t y e a r f o r which d a t a a r e a v a i l a b l e . 1978 and 1 9 7 9 . T h i s t r e n d l i n e t h e n show s a c o n t i n u i n g d e c l i n e o f 3 4 .0 00 b a r r e l s p e r y e a r . th e i n i t i a l T here was a m ajo r s h i f t downward b e tw e e n The im p le m e n ta tio n o f th e MBCDL c o i n c i d e s w ith d r o p i n a n n u al s a l e s . To c o n clu d e t h a t t h i s drop i n s a l e s was caused by t h e MBCDL, however, would i g n o r e t h e o t h e r m a j o r p o l i c y m e a s u r e w h ic h a l s o t o o k e f f e c t i n D ecem ber 1 9 7 8 , t h e r a i s i n g o f t h e l e g a l d r i n k i n g age from 18 t o 2 1 . The l e g a l d r i n k i n g a g e p o p u l a t i o n d r o p p e d by 4 7 0 , 0 0 0 p e o p le ( o r 7 p e r c e n t ) i n 1979. The s u b j e c t o f much o f th e1 re m a in d e r -of t h i s r e p o r t i s t o i s o l a t e and q u a n t i f y t h e e f f e c t s o f t h e s e two p o l i c y m easures on b e e r s a l e s . F ig u re 1 Michigan Beer S a le s W ith T r en d L i n e s T h ou san d s o f B a r r e ls 7500 7000 to to 6500 6000 5500 ACE MBCDL DECREASE AGE INCREASE 5000 x 1955 x X x x I960 X X x x x 1965 X X x. X X 1970 Y ears X X X X X 1975 1980 1983 33 Number o f Packages Sold The d a t a i n th e p r e v io u s s e c t i o n were hased on t o t a l s a l e s volume, r a t h e r th a n th e nuinber o f pack ag es s o l d . The law, how ever, s p e c i f i c a l l y a p p l i e s d e p o s i t s t o pack ag es c o n t a i n i n g one g a l l o n o r l e s s o f p r o d u c t, i . e . , b o t t l e s and c a n s . L ik e v o lu m e , t h e n um ber o f p a c k a g e s o f b e e r s o l d i n M ic h ig a n i n c r e a s e d s t e a d i l y from 1963 t o 1978 (P h ase I I ) , th e n d e c li n e d s h a r p l y i n 1979 (11 p e r c e n t ) and c o n tin u e d t o d e c l i n e t h r o u g h 1083 ( F i g u r e 2 ) . P a c k a g e s a l e s d e c li n e d a t a d e c r e a s i n g r a t e i n 1983 (u n d e r 1 p e r c e n t ) and t h i s may i n d i c a t e a change i n t h e t r e n d . The r a t e o f d e c r e a s e i n p a c k a g e s s o ld s i n c e 1978 i s g r e a t e r th a n t h e d e c r e a s e i n t o t a l volume. y e a r ( i . e . , 1^67 In dex ed v a l u e s , w i t h 1967 a s t h e b a s e = 10 0), show t h a t t h e p e r c e n t change i n packaged b e e r s a l e s ( i n c a s e s ) v a r i e d o v e r a w id e r ra n g e th a n th e change i n t o t a l b e e r v olum e s o l d i n M i c h i g a n ( i n b a r r e l s ) . (See F ig u r e 3)* Package s a l e s com prise a b o u t 90 p e r c e n t o f t h e t o t a l v olu m e sold, b e tw e e n 1 9 6 7 - 1 9 7 8 ; d r a u g h t b e e r makes up t h e re m a in d e r. th ro u g h o u t t h e 1967-1978 p e r i o d . Package s a l e s in c r e a s e d s t e a d i l y A f t e r 1978, t h e r e i s a d r a m a t i c d r o p i n p a c k a g e s a l e s fro m a n i n d e x o f 142 i n 1978, t o 127 t h e y e a r a f t e r . S a le s c o n tin u e t o f a l l t o a low o f 107 i n 1983* D r a u g h t b e e r s a l e s a r e n o t co v ered u n d e r t h e MBCDL b e c a u s e d ra u g h t b a r r e l s h o ld more t h a n o n e g a l l o n . D r a u g h t b e e r i s m o s t l y consum ed o n - p r e m i s e . D raught b e e r had a d i f f e r e n t s a l e s t r e n d th a n package s a l e s and t o t a l s a l e s p r i o r t o t h e MBCDL. D raught s a l e s d id n o t grow p r i o r t o t h e l o w e r i n g o f th e l e g a l age i n 1972, b u t i n c r e a s e d s i g n i f i c a n t l y t h a t y e a r (F ig u re 3 ). T h is g a in , h o w ev er, r e g r e s s e d b a c k n e a r t h e 1 967 l e v e l . w as t e m p o r a r y a n d q u i c k l y D raught s a l e s d u rin g t h i s p e r io d acco u n ted f o r a b o u t 10 p e r c e n t o f t o t a l b e e r s a l e s i n M i c h i g a n . 1979, In d r a u g h t s a l e s i n c r e a s e d r a p i d l y t o an in d e x o f more th a n 140 and c o n tin u e d t o g a i n , r e a c h i n g 151 i n 1983» The l a r g e i n c r e a s e i n d r a u g h t b e e r a p p e a r s to be a s u b s t i t u t i o n e f f e c t i n t h e c o n s u m p t i o n o f b e e r r e s u l t i n g fro m t h e MBCDL. Many r e s t a u r a n t s and b a r s i n c r e a s e d t h e i r d ra u g h t b e e r c a p a c i t y and v a r i e t i e s a s a r e s u l t o f t h e i r l i m i t e d s t o r a g e sp ac e f o r empty c o n t a i n e r s . P rio r t o th e MBCDL, th e s e e s t a b l i s h m e n t s d is c a r d e d n o n - r e t u r n a b l e c o n t a i n e r s . 5 With th e MBCDL t h e r e a r e no n o n - r e t u r n a b l e c o n t a i n e r s . R e t a i l e r s do n o t 34 Fiflur.e.-2. Michigan Packaged Beer Sales MILL. CASES (24 Pkgs. « a .) 95 C ases/Year 90 , 85 , ^ r r r 11 iirrrrr a n y ,' i .m i'----80 , an - i i ^IIL WpL L| liXD^— . Ji i TS . _ 71/ 70 65 •68 ’7 0 '7 2 '7 4 ‘76 Y ears '7 8 ‘8 0 *82 '83 Fifwr&JL Michigan Beer S a le s As P e r c e n t o f B a se Y ear 1967 (P e r c e n t o f 1967 S a le s ) DRAUGHT VOLUME 150 140 130 120 TOTAL SALES VOLUME r PACKAGE SALES (CASES) 110 MBCDL AGE INCREASE 100 1967 1970 1972 1975 Y ears 1980 1983 36 have to c h a rg e d e p o s i t s on b e v e r a g e s consumed on s i t e , even i f t h e s e a r e in cans or b o ttle s. e sta b lish m e n ts, W h o le sa le rs th a t su p p ly th e se re ta il h o w e v e r, a r e r e q u i r e d t o r e f u n d d e p o s i t s on a l l o f t h e p r o p e r l y marked empty c o n t a i n e r s t h a t a r e s u b s e q u e n tly r e t u r n e d t o them. As a r e s u l t , w h o l e s a l e r s i n i t i a l l y c h a rg e r e t a i l e r s t h e d e p o s i t on a l l c a n s and b o t t l e s . R e t a i l e r s , t h e r e f o r e , must r e t a i n t h e c o n t a i n e r s so t h a t th e y can be redeem ed. T h i s r e q u i r e s a d d i t i o n a l s t o r a g e space t o t e m p o r a r i l y s t o r e th e empty c o n t a i n e r s . The i n c r e a s e d c o s t o f p a c k a g e d b e e r t o r e t a i l e r s may a l s o have enco urag ed a d d i t i o n a l d ra u g h t c a p a c i t y . In th e o f f - p r e m is e m a rk e t, s u b s t i t u t i o n p a c k a g e d b e e r may a l s o have o c c u r r e d . of d raught beer fo r When t h e r e w ere g ro u p s o f p eo p le l a r g e enough t o consume more th a n t h r e e c a s e s o f b e e r , q u a r t e r o r h a l f b a rre ls (th re e a n d one h a l f c a s e s and s e v e n c a s e s r e s p e c t i v e l y ) , o f f - p r e m i s e d r a u g h t h e l d a p r i c e a d v a n ta g e . in c r e a s e in p ric e i n i t i a l l y in O ff- p re m is e d r a u g h t d id n o t 1979 and t h e l o g i s t i c a l r e c o v e r i n g th e empty c o n t a i n e r s f o r r e t u r n was re d u c e d . p r o b le m o f (Note t h a t what many p e o p l e t h i n k o f a s a " b a r r e l " o f b e e r i s t e c h n i c a l l y o n ly a h a l f b a r r e l c o n t a i n i n g 1 5 .5 g a l l o n s ( e q u i v a l e n t t o 6 .8 9 c a s e s ) . F u ll b a rre ls a r e o n l y u s e d f o r a c c o u n t i n g p u rp o s e s when m e a s u rin g b e e r s a l e s . They w ere fo un d t o be to o heavy f o r p r a c t i c a l u s e ) . MODELS OF BEER SALES Purpose f o r th e Models Demand m o d e l s f o r beer sa le s in M i c h i g a n w e re d e v e l o p e d by a n a l y z i n g a num ber o f v a r i a b l e s s t a t i s t i c a l l y re la tio n sh ip to beer s a le s. pre-MBCDL s a l e s o v e r t h e p e r i o d to d e te rm in e th e ir M a t h e m a t i c a l m o d e ls w e r e f i t t e d 1954-1978. to Once c a l i b r a t e d f o r t h e pre-MBCDL p e r i o d , t h e m odels w ere u sed t o p r e d i c t post-MBCDL s a l e s a s i f th e MBCDL d id n o t e x i s t . The d i f f e r e n c e b e tw e e n p r e d i c t e d s a l e s and a c t u a l s a l e s was t h e n m o d e le d t o d e t e r m i n e w h a t f a c t o r s c o u l d have caused any d i s c r e p a n c i e s . 37 C o n s t r u c t i n g t h e Models A model o f consumer demand f o r b e e r i n M ichigan must i n c l u d e o r a t l e a s t c o n s id e r th o s e f a c t o r s th o u g h t t o be most r e l e v a n t t o c o n s u m p t io n o f th e p ro d u c t. These i n c l u d e : 1) t h e number o f p o t e n t i a l consumers (o r r e l e v a n t p o p u l a t i o n ) , 2) t h e p r i c e o f t h e p ro d u c t r e l a t i v e t o o t h e r c o n s u m e r p u r c h a s e s , and 3) t h e amount o f consumer d o l l a r s a v a i l a b l e (o r d i s c r e t i o n a r y income).® Two c a u s a l m o d e ls w e re d e v elo p e d u s in g v a r i a b l e s w i t h i n th e s t a t e to p re d ic t beer s a le s . A t h i r d model was d e v e lo p e d t o compare M i c h i g a n s a le s to re g io n a l s a le s . F o r t h i s s t u d y , t h e v a l i d i t y o f a model was ju d g e d on t h e b a s i s o f t h e f o ll o w i n g c r i t e r i a : 1) th e l o g i c a l c o n n e c tio n o f th e p r e d i c t o r v a ria b le s to beer sale s, 2) a l o g i c a l d i r e c t i o n o f t h e r e l a t i o n s h i p s , and 3) th e s t r e n g t h o f t h e c o e f f i c i e n t o f m u l t i p l e d eterm in a tio n (R2). • The e c o n o m ic c o n d i t i o n s i n M ichigan d u r in g t h e p e r io d 1979-83 l o g i c a l l y s u g g e s t t h a t t h e demand m odel s h o u l d i n c l u d e m e a s u r e s o f u n e m p lo y m e n t, p r i c e , and p o p u l a t i o n . in c o m e , A " l o g i c a l d i r e c t i o n " f o r th e r e l a t i o n s h i p s means t h a t t h e c o e f f i c i e n t s must have t h e e x p e c t e d s i g n . F o r e x am p le, tw o m o d e l s w e r e d i s c a r d e d b e c a u s e t h e b e s t f i t t i n g c o e f f i c i e n t s f o r p o p u l a t i o n f o r t h e tim e p e r io d 1954-1971* were n e g a t i v e , which would i l l o g i c a l l y s u g g e s t t h a t a s p o p u l a t i o n i n c r e a s e d , b e e r s a l e s sh o u ld d e c r e a s e . T h e m o d e l s w e re c o n s t r u c t e d u s i n g m u l t i p l e l i n e a r r e g r e s s i o n a n a ly sis. T h is s t a t i s t i c a l t e c h n i q u e a s s u m e s t h a t t h e r e a r e l i n e a r ( s t r a i g h t l i n e ) r e l a t i o n s h i p s b e t w e e n t h e in d e p e n d e n t ( o r p r e d i c t o r ) v a r i a b l e s and t h e f a c t o r t o be e x p l a i n e d , i.e ., M ic h i g a n b e e r s a l e s . The c o e f f i c i e n t a s s i g n e d t o each p r e d i c t o r v a r i a b l e was a c o n s t a n t f o r th e e n t i r e tim e p e r i o d . T h i s t e c h n i q u e w as c h o s e n b e c a u s e i t is a w i d e l y u s e d and u n d e rs to o d method, and b e ca u se i t h a s been s p e c i f i c a l l y u s e d t o p r e d i c t th e im pact o f b e v e ra g e c o n t a i n e r l a w s i n M i c h i g a n a n d e lse w h e re .^ a m ore s o p h i s t i c a t e d te c h n i q u e c o r r e c t i n g f o r f i r s t o r d e r s e r i a l c o r r e l a t i o n s o f t h e e r r o r t e r m s was u s e d i n t h e e s t i m a t e s o f 38 s a l e s b a se d on r e g i o n a l s a l e s . F i r s t o r d e r s e r i a l c o r r e la tio n of th e e r r o r t e r m s ( a u t o - c o r r e l a t i o n ) was n o t a p r o b le m i n t h e two c a u s a l g models b a se d on v a r i a b l e s w i t h i n M ichigan. A r e l a t i v e l y h ig h l e v e l o f s t a t i s t i c a l s i g n i f i c a n c e used in th is stu d y . («(» = . 0 5 ) was Few dem and m o d e ls f o r b e e r s a l e s h a v e b e e n p u b l i s h e d s o c o m p a r i s o n w as l i m i t e d . T h e re f o re , th e h ig h l e v e l o f s i g n i f i c a n c e was u sed i n o r d e r t o p r o t e c t a g a i n s t s p u r io u s r e s u l t s . a re su lt, As r e l a t i o n s h i p s m u s t be h i g h l y s i g n i f i c a n t and c o n t r i b u t e g r e a t l y t o t h e e x p l a n a t o r y pow er o f t h e m o d el t o be r e t a i n e d . r e d u c e d t h e num ber o f v a r i a b l e s i n t h e m o d e l. T h is The s i g n i f i c a n c e c r i t e r i o n was r e l a x e d f o r th e v a r i a b l e m e asu rin g t h e e f f e c t o f t h e l e g a l age change. A lthough n o t s i g n i f i c a n t a t t h e .0 5 l e v e l , i t w as r e t a i n e d i n t h e m o d e l. T h i s a s s u m p t i o n i n t e n t i o n a l l y b ia s e d t h e model and t h e e s t i m a t e d e f f e c t o f th e MBCDL i s re d u c e d by alm o st th e i d e n t i c a l am ount a t t r i b u t e d t o t h e l e g a l a g e chang e v a r i a b l e . t h a t th e l e g a l d r in k in g age a f f e c t s th e The r e s e a r c h e r s b e l i e v e c o n su m p tio n o f b e e r and t h e r e f o r e have e x p l i c i t l y r e l a x e d t h e i r s e le c tio n c r i t e r i a to r e t a i n t h i s v a r i a b l e i n t h e m odels. V a lu es a r e p r e s e n t e d i n t a b l e s b o t h w i t h and w i t h o u t t h i s v a r i a b l e . T here i s c o n s i d e r a b l y i n t e r c o r r e l a t i o n amongst t h e in d e p e n d e n t v a r i a b l e s which may s h r o u d t h e t r u e e f f e c t o f t h e c h a n g e i n t h e minimum l e g a l d r i n k i n g a g e. There a l s o may be o t h e r v a r i a b l e s which a r e im p o r ta n t d e te r m in a n ts o f b e e r s a l e s w h ic h a r e n o t i n t h e m o d e ls. The d a t a u s e d t h r o u g h o u t t h e m o d e l i n g s e c t i o n a r e in c lu d e d a s Appendix 1. M odel-EgrlPd The t o t a l p e r i o d a n a l y z e d was from 1954 th ro u g h 1983. B eer s a l e s d u r in g t h i s p e r io d f e l l i n t o th e t h r e e d i s t i n c t p h a se s d e s c r i b e d e a r l i e r (F ig u re 1). The f i r s t two p h a s e s w e re u s e d a s t h e b a s e p e r i o d t o c a l i b r a t e t h e s t a t i s t i c a l model. T h is m o d el w as t h e n u s e d t o p r e d i c t p o t e n t i a l s a l e s t h a t m ig h t have o c c u r r e d i n phase t h r e e i f t h e MBCDL had n o t gone i n t o e f f e c t . first A model which d e s c r i b e d s a l e s d u r in g b o t h o f t h e two v e r y d i f f e r e n t p h a s e s was c o n s id e r e d more r e l i a b l e th a n one t h a t was c a l i b r a t e d f o r o n l y t h e s e c o n d , s t e a d y - g r o w t h p h a s e . Some r e s e a r c h h a s used a s h o r t e r p e r i o d , such as 1962-1978, t o model M ichigan Q beer s a le s . D u r in g t h a t t i n e p e r i o d , how ever, a s e c u l a r t r e n d l i n e 39 (i.e ., sim p ly p r e d i c t i n g s a l e s b ased on th e p a s s a g e of tim e ) w as c o r r e l a t e d w i t h 99 p e r c e n t o f t h e v a r i a t i o n i n M ichigan s a l e s which would make a c h a n g e i n t h e d e p e n d e n t v a r i a b l e o c c u r r i n g a f t e r 1978 d i f f i c u l t t o model c o r r e c t l y . F o u r t i m e p e r i o d s w e re u s e d t o t e s t f o r im p a c ts o f t h e MBCDL and age change p o l i c y i n t e r v e n t i o n s i n M ic h i g a n . 1954- 1 9 7 1 , The f i r s t p e rio d , s t o p p e d j u s t b e f o r e th e l e g a l age d e c r e a s e d from 21 t o 18. The second p e r io d r a n from 1954 th ro u g h 1974 t o i n c l u d e t h e f i r s t y e a r s o f lo w e r l e g a l a g e . th re e The t h i r d p e r io d was from 1954 t o 1978 and i n c lu d e d t h e e n t i r e s e r i e s up t o t h e i m p l e m e n t a t i o n o f t h e two p o l i c y m easures o f i n t e r e s t . The s e c o n d p e r i o d s h o u l d p i c k up s h o r t - t e r m e f f e c t s o f th e a g e c h a n g e w h ic h may n o t p e r s i s t o v e r t h e f u l l s e v e n y ears th a t M ichigan. p e o p le 18 y e a r s o l d w e re l e g a l l y a l l o w e d t o d r i n k i n The t h i r d p e r io d would model any l a s t i n g e f f e c t s o f t h e a g e c h a n g e and p r o v i d e t h e b a s e l i n e d a t a f o r p r e d i c t i o n o f s a l e s f o r th e y e a r s 1979-1983. The f o u r t h p e r io d i n c l u d e s t h e f u l l 30 y e a r s from 1954 th r o u g h 1983. B in a ry V a r i a b l e s A s i m p l e b i n a r y v a r i a b l e w as u s e d t o s t u d y t h e e f f e c t o f e a c h p o l i c y measure on b e e r s a l e s . By d e f i n i t i o n , a b i n a r y v a r i a b l e h a s j u s t two v a l u e s a n d i n t h e p r e s e n t s i t u a t i o n th e y a r e e i t h e r "on" o r " o f f . " T h is can a c c o u n t f o r s h i f t ( o r " s t e p c h a n g e s " ) i n t h e t r e n d l i n e s . sim p le i l l u s t r a t i o n o f t h i s ( F ig u r e 4) would have A an i n t e r v e n t i o n o c c u r a t tim e " t " c a u s in g a s t e p down i n t h e f u n c t i o n b e in g m odeled, b u t n o t a change i n t h e s l o p e . A b i n a r y v a r i a b l e c an be i n tr o d u c e d i n t o t h e model and a s s ig n e d a v a lu e o f 0 f o r a l l tim e p e r io d s p r i o r t o tim e " t , " v a lu e o f 1 f o r a l l p e r i o d s from " t " onward. and a The c o e f f i c i e n t a s s ig n e d t o th e b in a r y v a r i a b l e w i l l be e q u a l t o th e s h i f t o c c u r r i n g i n t h e f u n c t i o n a t t i m e t when t h e s u d d e n c h a n g e o c c u r r e d . can be e i t h e r up o r down. O bv iou sly t h e b i n a r y s t e p I f t h e p o l i c y change a f f e c t s t h e s lo p e o f th e demand- c u r v e , t h i s w i l l be a p p a r e n t from chang es i n t h e c o e f f i c i e n t s o f t h e o t h e r v a r i a b l e s i n t h e e q u a t i o n th e c o e f f i c i e n t o f d e term in a tio n (R2 ). 40 F ig u r e 4 B in a ry V a r ia b le Concept ___________________ .Time t —1 In th e case t a t hand, t+1 i f a l l o t h e r c o n d i t i o n s i n M ic h i g a n a r e c o n sta n t e x c e p t f o r th e p o lic y under s tu d y , th e n th e c o e ffic ie n t a s s i g n e d t o t h e b i n a r y v a r i a b l e w i l l be e q u a l t o t h e e f f e c t o f th e p o l i c y i n t e r v e n t i o n on s a l e s . The u se o f t h i s t e c h n i q u e a l l o w s o n e t o t e s t t h e s i g n i f i c a n c e a s w e l l a s t h e s i z e o f a change i n b e e r s a l e s from t h e p a t t e r n d evelo ped p r i o r t o t h e i n t e r v e n t i o n . The s i z e o f th e e f f e c t i s d e f i n e d a s th e c o e f f i c i e n t of th e b in a ry v a r ia b le . The s i g n i f i c a n c e o f t h e v a r i a b l e t o t h e e x p l a n a t o r y pow er o f t h e m odel i s th e t t e s t s t a t i s t i c fo r th a t v a ria b le . Two b i n a r y v a r i a b l e s w e re i n c o r p o r a t e d i n th e m odels. The f i r s t b in a r y v a r i a b l e r e p r e s e n t e d t h e MBCDL p o l i c y and was g iv e n t h e v a l u e o f 0 fo r th e years 195 4 -1 9 7 8 . It w as a s s i g n e d t h e v a lu e o f 1 f o r 1979-1983, th e y e a r s s i n c e th e p o l i c y was im plem ented. A nother s e p a r a t e b i n a r y v a r i a b l e was u sed f o r t h e ch an ges i n l e g a l d r i n k i n g a g e . I t was a s s ig n e d t h e v a lu e 0 f o r 1954-1971 b e f o r e t h e age was lo w e re d t o 18, and a g a in f o r 1979-1983 a f t e r th e age was r e s t o r e d t o 2 1 . T h is v a r i a b l e was s e t a t 1 f o r t h e y e a r s 1972-1978 when th e l e g a l d r i n k i n g age was 18. ■Eopulation V a r ia b le C o n s u m p tio n o f a p r o d u c t i s d i r e c t l y r e l a t e d t o t h e num ber o f p e o p le who a r e p o t e n t i a l c u s t o m e r s . W ith a l c o h o l i c b e v e r a g e s , a n d e s p e c i a l l y b e e r and w i n e , t h e r e a r e s e v e r a l c o n f l i c t i n g h y p o t h e s i s r e g a r d i n g t h e d e f i n i t i o n o f th e r e l e v a n t p o p u l a t i o n i n a r e g i o n . T hree o f them a r e c o n s id e r e d h e re .^ ® P o p u la tio n . H y p o th e sis I i s t h a t th e r e l e v a n t p o p u la tio n i s composed o f i n d i v i d u a l s i n M i c h i g a n b e t w e e n t h e a g e s o f 18 and 44 y e a r s . Simmons Market R ese arch R ep o rt Bureau s tu d y r e p o r t e d t h a t i n A 1979 t h i s 41 g r o u p c o m p r i s e d b e t w e e n 70 and 75 p e r c e n t o f b o th heavy u s e r s and a l l u s e r s o f d o m e s t i c a n d i m p o r t e d b e e r . 11 An i n d u s t r y s o u rc e i n d i c a t e d t h a t some b re w e rs u se th e even s m a l l e r s e g m e n t o f 18—34 a s t h e t a r g e t p o p u l a t i o n i n t h e i r m e d ia im p a c t r e s e a r c h . A s t u d y f u n d e d by t h e F e d e r a l Energy A d m i n i s t r a t i o n u s e d th e even s m a l l e r p o p u l a t i o n s e g m e n t o f 20 t o 34 y e a r s o f age as t h e r e l e v a n t p o p u l a t i o n f o r p r e d i c t i n g b e e r 19 sa le s. P o p u l a t i o n H y p o t h e s i s I I i s t h a t th e r e l e v a n t p o p u la tio n i n c l u d e s a ll th o s e in d iv id u a ls in M ich ig an o f le g a l d rin k in g age. T h is d e f i n i t i o n le a d s to s i g n i f i c a n t changes in th e p o p u la tio n as a r e s u l t o f le g a l age c h an g e s. I n M i c h i g a n t h e l e g a l p o p u l a t i o n i n c r e a s e d by 6 0 0 ,0 0 0 ( o r 11 p e r c e n t ) i n 1972 and d e c l i n e d by 4 7 0 ,0 0 0 ( o r 7 p e r c e n t ) in 1979. T h is d e f i n i t i o n i s u s e d by t h o s e s u p p o r t i n g t h e c o n t r o l o f y o u t h f u l d r i n k i n g th ro u g h age m a n d a t e s .13 P o p u la tio n H y p o th e sis I I I th o s e i s t h a t t h e r e l e v a n t p o p u l a t i o n e q u a ls i n d i v i d u a l s i n M i c h i g a n 18 y e a r s o f a g e a nd o l d e r . s i m i l a r t o e ach o f t h e f i r s t two h y p o th e s e s . it T h is i s I t i s s im ila r to I in th a t does not c o n s id e r th e change o f le g a l age as s ig n if ic a n t. It is sim ilar to I I in including the population 45 and o ld e r which in c r e a s e s th e s i z e o f t h e r e l e v a n t p o p u l a t i o n by a t l e a s t 70 p e r c e n t . T h is d e f i n i t i o n i s o f t e n u sed by t h o s e who h o ld t h a t an i n c r e a s e i n l e g a l age w i l l n o t s i g n i f i c a n t l y a f f e c t consum ption i n t h e e x c lu d e d g ro u p . 1ii A ll t h r e e o f t h e s e p o p u l a t i o n h y p o th e s e s w ere e x a m in e d f o r t h e 30 y e a r s t u d y t i m e p e r i o d ( F ig u r e 5)* To compare th e s e h y p o th e s e s i t was n e c e s s a r y t o i n c o r p o r a t e a l l o f them i n t o t h e same m o d e l. t h e p o p u l a t i o n d a t a was d i v i d e d i n t o t h r e e c l a s s e s : To do t h i s 1) "Y o u n g er," aged 18 t o 20 y e a r s o l d , 2) " M id d le ," aged 21 t o 44 , and 3) " O l d e r , " a g e d 45 and o l d e r . Each p o p u l a t i o n h y p o t h e s i s i s b a s e d o n a c o m b in a tio n o f th e se c la s s e s . D e fin e d i n t h i s way, i t was p o s s i b l e t o i n c o r p o r a t e a l l t h r e e c o m p o n e n ts o f p o p u l a t i o n i n t h e same e q u a t i o n and o b s e r v e t h e amount o f t h e v a r i a t i o n i n b e e r s a l e s t h a t each e x p l a i n e d . S e v e r a l c o n c l u s i o n s can be drawn from t h i s t e s t and t h e r e s u l t i n g p a t t e r n o f c o e f f i c i e n t s and s i g n i f i c a n c e l e v e l s f o r t h e v a r i a b l e s (T ab le 1). The v a r i a b l e s f o r p o p u l a t i o n 18-20 and p o p u l a t i o n 21-44 b o th had p o s i t i v e c o e f f i c i e n t s i n d i c a t i n g t h a t as th e number o f p e o p le i n c r e a s e d , c o n su m p tio n in c re a s e d . They were b o th s i g n i f i c a n t ( a t th e .0 5 l e v e l o f IN TH( ION ;ands F ig u re 5 Pop ulation (18 y e a rs and o ld e r ) P o p u la tio n Hypotheses 6500 P o pu lation ( le g a l d rin k in g age) 6000 5500 5000 4500 Population (18 - 44 y e a rs old ) 4000 3500 3000 AGE MBCDL AGE INCREASE DECREASE 2500 X X 1955 1960 1955 x x X 1970 Years X X X X 1975 x x 1980 X X X 1983 43 .Table. 1 T e s t o f P o p u lt lo n H ypotheses M ichigan B eer S a le s ( B a r r e l s x 100) O rd in a ry L e a s t S q u a re s R e g r e s s io n -Period____________ I ____________ H ____________ I I I _____________________ I I 1954-■1978 Time Frame 1954[-1974 1954-1983 1954-71 Column R2 ( A d j.) 1 .9 4 5 2 3 4 5 6 7 8 9 .973 .972 .986 .986 .977 .986 .988 .988 C o n sta n t (t s ta t.) 3293 (2 .1 ) 1927 ( 1 .6 ) 2676 (1 .8 ) 903 ( 1 .4 ) 1184 ( 1 .5 ) 3385 ( 6 .7 ) 2631 (6 .0 ) 904 ( 1 .5 ) 1218 ( 1 .7 ) Pop 18-20 (t s ta t.) 5 .6 8 8 (4 .4 ) 4 .9 10 (4 .2 ) 5.246 (4 .2 ) 4.157 (5 .2 ) 4.171 (5 .1 ) 6 .8 37 (9 .1 ) 4 .9 7 2 (6 .7 ) 4.156 (5 .5 ) 4 .1 7 3 (5 .5 ) Pop 21-44 (t s ta t.) .558 ( 1 .1 ) 1.024 (2 .7 ) .765 (1 .6 ) 1.370 ( 7 .0 ) 1.269 (5 .2 ) .5 55 (4 .2 ) .764 (6 .6 ) 1.358 (7 .3 ) 1.246 (5 .4 ) Pop 45+ (t s ta t.) - .5 1 4 (-1 .5 ) - .2 9 7 - . 4 0 0 (-1 .0 ) (-1 .2 ) - .1 0 4 (-.5 ) - . 1 2 2 - .7 2 7 - .3 3 8 ( - .5 ) (-3 .2 ) (- 1 .7 ) -.0 9 1 (-.4 ) -.1 1 2 (-.5 ) Age (t s t a t .) 94 (.9 ) MBCDL (t s t a t . ) Durbin-W atson S ta tistic 72 (.8 ) 236 (4 .1 ) 65 (.7 ) -457 -357 (- 5 .0 ) ( - 2 .4 ) 2 .2 1 .9 2 .1 1.7 1 .8 1 .2 1 .6 1 .7 1.7 44 n e f i n i t i o n s f o r Model V a r i a b l e s Pop 18-20 i s t h e v a r i a b l e f o r th e M ichigan p o p u l a t i o n 18 th ro u g h 20 y e a r s o f age ( i n t h o u s a n d s ) . Pop 21-44 i s t h e v a r i a b l e f o r th e M ichigan p o p u la tio n 21 th ro u g h 44 y e a r s o f age ( i n th o u s a n d s ) . Pop 45+ i s t h e v a r i a b l e f o r th e M ichigan P o p u la tio n 45 y e a r s o ld and o l d e r ( i n t h o u s a n d s ) . Age i s t h e b i n a r y v a r i a b l e f o r th e e f f e c t o f t h e lo w e r l e g a l d r i n k i n g age (1972-1978) when i t assumes t h e v a lu e 1. It i s 0 fo r a l l o th e r y e ars. MBCDL i s t h e b i n a r y v a r i a b l e f o r t h e e f f e c t o f t h e M ichigan Beverage C o n ta in e r D e p o s it Law a s s u m in g t h e v a l u e 1 f o r t h e s e y e a r s (1 9 7 9 -1 9 8 3 ). I t i s 0 f o r a l l o t h e r y e a r s . R2 a d j u s t e d i s t h e p e r c e n t o f t h e v a r i a t i o n i n M ichigan b e e r s a l e s a ro u n d t h e i r mean which c an be r e l a t e d t o v a r i a t i o n i n t h e i n d e p e n d e n t v a r i a b l e s , a d j u s t e d downward t o a c c o u n t f o r t h e number o f i n d e p e n d e n t v a r i a b l e s i n t h e eq u atio n . D u rb in Watson i s th e t e s t s t a t i s t i c fo r s e r i a l c o rre la tio n o f th e e rro r te rm s in a r e g r e s s i o n e q u a t i o n . I n t h e m o d e ls p r o p o s e d h e r e , a D-W v a l u e o f 1 .6 o r h ig h e r i n d i c a t e s t h a t s e r i a l c o r r e l a t i o n i s i n s i g n i f i c a n t a t t h e .0 5 l e v e l . 45 c o n fid e n c e ) f o r th e 1954-1978 and 1 9 5 4 -1 9 8 3 tim e p e r i o d s . S in c e th e r e l a t i o n s h i p s w e re b o th l o g i c a l and s i g n i f i c a n t , th e y were r e t a i n e d i n t h e model. The p o p u l a t i o n s e g m e n t 45 and o v e r c o n s i s t e n t l y h a d a n e g a ti v e c o e ffic ie n t. T h is i n d i c a t e d an i n v e r s e r e l a t i o n s h i p b e tw ee n t h i s s e g m e n t o f p o p u l a t i o n and b e e r c o n s u m p t i o n ( i . e . , a s t h e number o f peop le 45 and o l d e r i n c r e a s e d , t o t a l b e e r con su m p tio n was p r e d i c t e d t o d ecrease). T h i s was an i l l o g i c a l i n s i g n i f i c a n t i n m o st o f t h e a ss o c ia tio n , e q u a tio n s, (at th e s ta tistic a lly .0 5 l e v e l ) and t h e r e f o r e , i t was d e l e t e d . Economic V a r i a b l e s As a n i n d e x o f t h e M ichigan economy, th e ann ual unemployment r a t e ( a s a p e r c e n t o f t h e l a b o r f o r c e ) was u s e d i n b u i l d i n g t h e p r e d i c t i v e m odel ( F i g u r e 6 ) . ^ T h is i s t h e o n ly economic i n d i c a t o r i n t h e model and i t i s e x p e c te d t o be i n v e r s e l y r e l a t e d t o b e e r s a l e s b e c a u s e a h i g h unemployment r a t e i n d i c a t e s a s l u g g i s h economy. T h is does n o t r e f u t e th e ifi commonly h e l d b e l i e f t h a t b e e r s a l e s i n c r e a s e i n bad t i m e s . I t sim ply means t h a t b e e r s a l e s w i l l grow a t a s lo w e r r a t e d u r in g r e c e s s i o n s t h a n th e y w i l l d u r in g h e a l t h y growth p e r i o d s , a l l o t h e r t h i n g s b e in g e q u a l . Model I M odel I w as f i t t e d t o e a c h o f t h e f o u r t i m e p e r i o d s (T ab le 2 ) . T h is i s a tim e s e r i e s model s o i t i s im p o r ta n t t o d e te rm in e i f th e e r r o r i n one y e a r ' s s a l e s p r e d i c t i o n i s i n a p p r o p r i a t e l y a f f e c t i n g t h e o b serv ed s a l e s f o r th e n e x t y e a r , o r w hat i s c a lle d a u to -c o rre la tio n . D urbin-W atson t e s t i n d i c a t e s w h e th e r o r n o t i n t i m e s e r i e s d a t a . 1^ s ig n ific a n t a t th e The a u to -c o rre la tio n i s p resent The D urbin-W atson v a l u e s f o r Model I were no t .0 5 l e v e l f o r a n y o f t h e ti m e p e r i o d s . E ven s o , f i r s t o r d e r s e r i a l c o r r e l a t i o n c o r r e c t i o n te c h n iq u e was used t o d o u b le check f o r a u t o - c o r r e l a t i o n e f f e c t s (T ab le 3 ) . The c o e f f i c i e n t s f o r t h e co m p arab le v a r ia b le s a r e e s s e n t i a l l y i d e n t i c a l . I n a d d i t i o n , t h e v a lu e fo r th e v a ria b le " rh o ," th e c o r r e c t i o n f a c t o r f o r f i r s t o r d e r s e r i a l c o rre la tio n , is s m a l l a n d i n s i g n i f i c a n t d u r i n g a l l fo u r tim e p e r i o d s . For t h e s e r e a s o n s , a u t o - c o r r e l a t i o n was c o n s id e r e d t o b e i n s i g n i f i c a n t i n t h e d a t a and t h e m ore common o r d i n a r y l e a s t s q u a r e s te c h n iq u e was used. Figur e 6 Unemployment in P e rc e n t o f Labor Force 1955 Michigan Unemployment Rate 1960 Years 47 Xafels. 2 M o d el I : M ic h ig a n B e e r S a l e s ( B a r r e l s x 1 0 0 0 ) O r d in a r y L e a s t S q u a r e s R e g r e s s i o n P e r io d ____________ I ___________ I I ___________ H I _________________________ IV 1954- 1978 Time Frame 1954 -1974 1954-1983 1954 -71 Column 1 2 3 4 5 6 7 8 9 10 R2 (A dJ.) .962 .982 .982 .988 .988 .971 .988 .990 .990 .989 C onstant (t s ta t.) 929 (1 .9 ) 544 (1 .5 ) 811 (1 .7 ) 473 (1 .9 ) 790 (2 .1 ) 1714 (6 .4 ) 1729 ( 9 .8 ) 502 (2 .2 ) 833 (2 .3 ) 656 (2 .8 ) Pop 18-20 (t s t a t .) 3.368 (11 .0) Pop 21-44 (t s ta t.) 1.441 (6 .3 ) Munem (t s ta t.) -25.1 ( - 3 .0 ) 3.382 3.345 3.600 3-515 4.441 3-546 3.635 3.548 3.846 (11 .5 ) (1 1 .2 ) (1 2.5 ) (11 .8 ) (10 .5 ) (1 1 .3 ) (1 3 .4 ) (1 2 .7 ) (14 .2) 1.595 ( 8 .9 ) 1.492 1.567 (6 .8 ) (11 .4 ) 1.452 (8 .5 ) .955 (5 .7 ) 1.071 1.548 (9 .6 ) (1 2.0 ) -2 4 .9 -2 5 .3 -1 4 .4 -1 5 .9 -1 6 .6 - 1 8 .0 -1 3 .9 - . 1 5 . 1 ( - 3 .2 ) ( - 3 . 2 ) ( - 2 . 0 ) ( - 2 . 1 ) ( - 1 . 5 ) ( - 2 .5 ) ( - 2 .2 ) ( - 2 . 4 ) Age (t s ta t.) 284 (6 .0 ) 92 (1 .1 ) 67 ( .8 ) MBCDL (t s t a t . ) Durbin-Watson S ta tistic Mumem: fo r ce . 1.428 1.419 (8 .8 ) (11 .6) 96 (1 .2 ) -482 -346 -473 ( - 7 . 1) ( - 2 . 8 ) ( - 6 .8 ) 2 .4 2 .2 2.3 1.8 1.9 .8 1.8 1.9 2 .0 1.7 i s t h e v a r i a b l e f o r t h e M ic h ig a n u n e m p lo y m e n t r a t e a s a p e r c e n t o f t h e l a b o r 48 Xablg_3. M odel I ; M ic h i g a n B e e r S a l e s ( B a r r e l s x 1 0 0 0 1 F i r s t O rd er S e r i a l C o r r e l a t io n C o r r e c t io n R e g r e s s io n T e o h n lo u e Period____________ I____________ I I Time Frame 1954-1974 1954-71 Column 1 R2 (A d j.) .9 8 9 C o n sta n t (t s ta t.) 818 ( 2 .1 ) Pop 18-20 (t s ta t.) 3.326 (13. 6) Pop 21-44 (t s t a t .) 1 .499 (8 .3 ) Munem (t s ta t.) -2 7 .9 (-3 .8 ) 2 3 I I I _____________________ IV 1954 -1978 1954-1983 4 5 6 7 8 .991 .99 2 .987 .9 8 9 .940 .984 .990 510 ( 1 .7 ) 774 (2 .0 ) 480 ( 1 .9 ) 787 (2 .1 ) 1929 (4 .8 ) 1758 (9 .2 ) 498 (2 .2 ) 3.344 3 .3 0 0 3.604 3-512 (1 3 .6 ) ( 1 3 .5 ) (1 2 .3 ) ( 1 2 .0 ) 1.620 (1 0 .7 ) 1 .5 2 0 1.563 ( 8 . 4 ) ( 1 1 .2 ) 1.454 (8 .5 ) .992 817 ( 2 .4 ) 4 .5 5 2 3 .5 9 2 3 .6 3 2 3.534 ( 6 .7 ) ( 1 0 .4 ) ( 1 3 .5 ) ( 1 3 .2 ) .844 (3 .8 ) 1 .048 1.551 ( 8 . 8 ) ( 1 2 .1 ) 1.438 (9 .2 ) -2 7 .1 - 2 8 . 0 - 1 4 . 3 - 1 6 .1 - 1 1 .8 - 1 6 .3 - 1 4 . 0 - 1 5 . 6 (-3 .7 ) (-3 .9 ) (-1 .9 ) (-2 .2 ) (-1 .4 ) (-2 .2 ) (-2 .2 ) (-2 .5 ) Age (t s ta t.) 68 (-1 .0 ) 93 ( 1 .1 ) 97 (1 .2 ) 277 (5 .4 ) MBCDL (t s ta t.) -474 -348 (-7 .2 ) (-2 .9 ) Rho (t s ta t.) -.2 9 2 (-1 .1 ) D u r b in - W a t s o n S ta tis tic R ho: i s te rm s. 9 1 .9 -.2 2 4 -.2 5 9 (-.9 ) (-1 .1 ) 1.9 1.9 -.0 2 5 (.1 ) - . 158 (-.1 ) -.5 9 8 ( 3 .9 ) 1.9 1 .9 2 .1 .118 - . 0 1 3 - .0 5 8 ( 0 .6 ) ( - 0 . 1 ) ( - 0 . 3 ) 1.9 1 .9 1.9 th e v a r ia b le to c o r r e c t f o r f i r s t o r d e r s s e r i a l c o r r e la t io n o f th e e r r o r 49 The b i n a r y v a r i a b l e f o r t h e chang e i n l e g a l d r i n k i n g age was n o t s i g n i f i c a n t a t th e e q u a ti o n w h ere .0 5 o r e v e n t h e th is .5 l e v e l (T a b le 2 ). The o n ly v a r i a b l e was s i g n i f i c a n t was f o r t h e p e r i o d 195H-1983 when th e MBCDL v a r i a b l e was e x c lu d e d from t h e e q u a t i o n . The age v a r i a b l e d o es n o t e x h i b i t a s i g n i f i c a n t r e l a t i o n s h i p w ith beer s a l e s , but a s s t a t e d e a r l i e r t h e r e s e a r c h e r s r e t a i n e d t h i s v a r i a b l e un der th e a ssu m p tio n t h a t th e o b s e rv e d r e l a t i o n s h i p was a t r u e one. The b in a r y v a r i a b l e f o r th e MBCDL i t s e l f w as s i g n i f i c a n t a n d h a d t h e e x p e c t e d , n e g a ti v e s i g n . T h is v a r i a b l e c o u ld o n ly be t e s t e d on t h e f u l l t h i r t y y e a r tim e p e r i o d . The c o e f f i c i e n t o f d e t e r m i n a t i o n (R2 ) v a lu e was v e r y h ig h i n each o f th e tim e p e r i o d s . p e rio d The v a l u e s i n c r e a s e fr o m .9 6 2 f o r t h e s h o r t e s t (1954-1971) to .9 9 0 f o r th e l o n g e s t p e r i o d . T h is 4 p ercen t i n c r e a s e i n e x p l a n a t o r y pow er i s a r e s u l t o f t h e in c re a se d v a r i a t i o n o f t h e l o n g e r time s e r i e s a b ou t i t s mean. The s t a n d a r d e r r o r o f th e r e g r e s s i o n i s t h e same i n b o th s e r i e s . to ta l M eaningful c o m p a r is o n o f s m a l l d i f f e r e n c e s i n R2 , s f o r t h e g o o d n e s s o f f i t c a n b e made o n ly w i t h i n th e same tim e p e r io d . iteg V tl.fr,9 , The tw o p o p u l a t i o n v a r i a b l e s f o r t h e s e g m e n t s 1 8 -2 0 and 2 1 -4 4 showed s i g n i f i c a n t r e l a t i o n s h i p s w ith b e e r s a l e s . The s e g m e n t o f t h e p o p u l a t i o n 45 and o v e r show ed a c o n s i s t e n t l y i l l o g i c a l r e l a t i o n s h i p ( i n v e r s e ) w ith b e e r s a l e s and was g e n e r a l l y i n s i g n i f i c a n t . The b i n a r y v a r i a b l e f o r th e age c h an g e s had c o e f f i c i e n t s i n th e e x p e c te d d i r e c t i o n b u t was an i n s i g n i f i c a n t p r e d i c t o r o f b e e r s a l e s . The MBCDL b i n a r y v a r i a b l e show ed a s i g n i f i c a n t r e l a t i o n s h i p i n th e e x p e c te d d i r e c t i o n w ith b e e r s a l e s . 50 I n i t s f i n a l form , Model I i s : M ichigan B eer S a le s (b a rre ls) = 833,000 ( a c o n s t a n t term ) 3.5118 (x) P o p u la tio n 18-20 1.428 (x ) P o p u l a t i o n 21-44 15,100 (x ) Unemployment a s % o f la b o r force 96 ,00 0 D urin g e a c h y e a r le g a l d rin k in g age was lo w e r (1972-1978) 3 46 ,000 D u ring e ac h y e a r o f MBCDL (1979-1983) The i n d e p e n d e n t v a r i a b l e s w ere a l l s i g n i f i c a n t a t th e .0 5 l e v e l i n a l l tim e p e r i o d s w ith th e e x c e p t i o n o f t h e c o n s t a n t w h ic h was s i g n i f i c a n t first a t th e .2 l e v e l f o r th e 1954-1974 tim e p e r io d and t h e l e g a l age change v a r i a b l e . The c o e f f i c i e n t s e x h i b i t e d s t a b i l i t y p e r i o d s a n d t h e i r s i g n s were c o n s i s t e n t (T a b le 4 ) . d e te rm in a tio n 1954-1983. (R ^) in c re a s e d from .9 6 fo r T h is w as a v e r y h i g h r e l a t i o n s h i p , a c r o s s t h e tim e The c o e f f i c i e n t o f 1 9 5 4 -1 9 7 1 t o .9 9 f o r e s p e c i a l l y g iv e n th e t h r e e d i f f e r e n t grow th p a t t e r n s i n t h e s a l e s d a t a . Model I p r e d i c t s t h a t t h e MBCDL h a d a n e g a t i v e and s i g n i f i c a n t e f f e c t on b e e r s a l e s i n M ichigan ( F ig u r e 7 ) . The b e s t e s t i m a t e o f t h a t e f f e c t was a r e d u c t i o n o f 3 46,000 b a r r e l s p e r y e a r . The e f f e c t o f t h e c h a n g e i n t h e l e g a l d r i n k i n g age was e s t i m a t e d t o be 96 ,0 0 0 b a r r e l s p e r y e a r added t o s a l e s when t h e l e g a l age was 18 y e a r s o l d . Purpose f o r Model I I The m o d el M ichigan d a t a . d e sc rib e d a b o v e had t h e b e s t o v e r a l l f i t w ith th e However, s e p a r a t e m e a s u re s f o r p r i c e and in c o m e c o u l d n o t b e i n c o r p o r a t e d i n t o t h a t m o d el a s l o n g a s t h e two p o p u l a t i o n Table 4 S u m m ary o f. Model 1 M ic h i g a n B e e r S a l e s ( B a r r e l s x 1 0 0 0 ) O r d in a r y L e a s t S q u a r e s R e g r e s s i o n P e r i o d _____________ I _____________ I I _____________ H I __________ I I 1954-1983 Time Frame 1954-1978 1954-1974 1954-1971 Column 1 2 .9 8 8 4 R2 ( A d j.) .962 C o n sta n t (t s ta t.) 929 ( 1 .9 ) 811 (1 .7 ) 790 ( 2 .1 ) 833 ( 2 .3 ) Pop 18-20 (t s ta t.) 3 .3 7 (1 1 .0 ) 3 .34 5 ( 1 1 .2 ) 3.515 ( 1 1 .8 ) 3.548 ( 1 2 .7 ) Pop 21-44 (t s ta t.) 1.441 ( 6 .3 ) 1.492 (6 .8 ) 1.452 ( 8 .5 ) 1.428 (8 .8 ) Munem (t s ta t.) -2 5 .1 (-3 .0 ) -2 5 .3 (-3 .2 ) -1 5 .9 (-2 .1 ) - 1 5 .1 (-2 .4 ) 67 (.8 ) 92 ( 1 .1 ) 96 (1 .2 ) Age (t s ta t .) .982 3 MBCDL (t s ta t.) D urbin Watson .990 -346 (-2 .8 ) 2 .4 2 .3 1.9 2 .0 F ig u re ? HODEL I Aotual and F i t t e d Michigan Beer S a le s T h o u sa n d s o f B a r r e ls P r o je c te d S a le s 7500 7000 F i t t e d fr o m M o d e l 6500 A c tu a l S a le s 6000 5500 AGE MBCDL DECREASE AGE INCREASE 5000 1955 1960 1965 1970 1975 1980 1983 Y ears 53 segm ents (18 -2 0 and 21 -4 4) were e n t e r e d as s e p a r a t e v a r i a b l e s due t o t h e h ig h l e v e l o f i n t e r c o r r e l a t i o n among t h e v a r i a b l e s . When th e s e two p o p u l a t i o n i n d i c a t o r s w ere a g g r e g a t e d i n t o a s i n g l e v a r i a b l e f o r t h e p o p u la tio n 1 8 - 4 4 , p r i c e a n d in c o m e v a r i a b l e s becam e s i g n i f i c a n t and c o uld be in c lu d e d i n a second m odel, c a l l e d Model I I . Income T o t a l M ic h ig a n p e r s o n a l income was u sed f o r th e income v a r i a b l e . 18 T o t a l incom e, i n s t e a d o f p e r c a p i t a income, a v o id s t h e p o s s i b l e d o u b l e e n try of th e p o p u la tio n v a ria b le o r , w o rse, th e c lo u d in g o f th e p o p u l a t i o n v a r i a b l e w i t h a p e r c a p i t a in c o m e v a l u e based o n som e d i f f e r e n t d e f i n i t i o n o f t h e p o p u l a t i o n . The In d e x o f Buying Power was a l s o t e s t e d a s an income v a r i a b l e , b u t i t s p r e d i c t i v e power was s i m i l a r t o p e r s o n a l income so th e more commonly known p e r s o n a l income f i g u r e was u s e d .^ P e r s o n a l in c o m e w as d e f l a t e d t o P r i c e In d e x (C P I). u n til 1967 d o l l a r s u s in g t h e Consumer Real in co m e w a s i n c r e a s i n g t h r o u g h o u t t h e p e r i o d 1980 ( F i g u r e 8 ) . I t i n c r e a s e d by a f a c t o r o f more th a n 2 d u r in g t h e t h i r t y y e a r p e r i o d , w hich was tw ic e th e r a t e o f b e e r s a l e s i n c r e a s e . P r i c e o f M ichigan B eer P r i o r t o t h e MBCDL, t h e r e w as s p e c u l a t i o n t h a t th e p r i c e o f b e e r would change w ith t h e la w . There have been s e v e r a l s t u d i e s d o c u m e n t i n g a p r i c e d i f f e r e n t i a l f o r b e v e r a g e s betw een MBCDL s t a t e s and non-MBCDL pn n e ig h b o r in g s t a t e s . To m easu re p r i c e c h an g e s i n M ichigan, a c t u a l b e e r p r i c e s w ere c o l l e c t e d f o r t h e p e r i o d s t a r t i n g w i t h 1 9 7 6 , t h r e e y e a r s b e f o r e t h e la w t o o k e f f e c t . 2 ^ To i n c o r p o r a t e p r i c e a s a p r e d i c t o r v a r i a b l e i n t h e model, a c t u a l M ichigan r e t a i l s h e l f p r i c e s f o r t h e y e a r s 1 9 7 6 - 1 9 8 3 w e re ' s p l i c e d i n t o b eer. 22 t h e n a t i o n a l C onsum er P r i c e I n d e x f o r The a c t u a l M i c h i g a n p r i c e s u s e d a r e t h e a v erag e su p erm ark et s h e l f p r i c e s o f t h r e e premium b ra n d s which had a c o m b in e d m a r k e t s h a r e o f a b o u t 40$ i n M ichigan d u r in g t h e l a s t f i v e y e a r s . P r i c e c h an g e s a r e d e s c r i b e d i n more d e t a i l i n a l a t e r s e c t i o n o f t h i s r e p o r t . As a c h e c k o n th e . v a l i d i t y o f t h e i m p l i c i t a s s u m p t i o n t h a t th e p r i c e o f b e e r i n M ichigan p r i o r t o 1976 was s i m i l a r t o t h e a v e ra g e p r i c e o f b eer in th e n a tio n ( a s r e f l e c t e d i n th e CPI f o r m a lt b e v e r a g e s ) , a F ig u re 8 BILLIONS OF 1967 $ ' s Michigan T o ta l P erso n al Income (1967 D o lla r s ) 40 l_n 4> 1955 1960 1965 1970 Years 1975 1980 1983 55 com parison was made u s i n g th e Consumer P r i c e In d e x f o r a l l i t e m s . T h is in d e x i s a v a i l a b l e f o r t h e D e t r o i t M e tr o p o lita n A rea as a s u b - s e t o f t h e n a tio n a l av erag e . ^ The c o r r e l a t i o n c o e f f i c i e n t b e t w e e n t h e s e two s e r i e s was .9 9 9 8 ; t h e r e f o r e , M ichigan b e e r p r i c e s a r e a ss u m e d t o h a v e changed i n a s i m i l a r manner t o N a tio n a l b e e r p r i c e s p r i o r t o 1976. A r e l a t i v e M ichigan b e e r p r i c e i n d e x w as d e r i v e d by d i v i d i n g t h e B e e r P r i c e in d e x by th e Consumer P r ic e In d e x f o r D e t r o i t f o r a l l ite m s . T h is r e l a t e s b e e r p r i c e s t o a l l o t h e r consum er e x p e n d i t u r e s . re la tiv e The p r i c e o f b e e r d e c lin e d th ro u g h o u t th e p e rio d w ith n o ta b le e x c e p t i o n s i n 1975 and e s p e c i a l l y 1979 ( F ig u r e 9 ) . P r ic e -I n o o m e V a r ia b le Even a f t e r a g g r e g a t i n g t h e p o p u l a t i o n d e s c r i p t o r s i t w as n o t p o s s i b l e t o d e v e l o p a m od el w h ic h i n c l u d e d t h e th re e m a in dem and v a r i a b l e s o f p o p u l a t i o n , income, and p r i c e s e p a r a t e l y b ecause o f t h e i r h ig h d e g re e o f i n t e r c o r r e l a t i o n . c o m b in a tio n w ith one o f th e E a c h w as h i g h l y o th e rs, in te ra c tiv e v a ria b le . in b u t t o g e t h e r , o n l y tw o w e re s i g n i f i c a n t f o r any tim e p e rio d ( a t t h e .05 l e v e l ) . two e c o n o m ic i n d i c a t o r s , sig n ific a n t F or t h i s r e a s o n th e p r i c e and in c o m e , w e re combined t o form an By m u l t i p l y i n g t h e r e c i p r o c a l o f t h e p ric e v a r i a b l e tim e s th e income v a r i a b l e , a new s i n g l e v a r i a b l e (PRICINC) was form ed. T h i s v a r i a b l e c o m b in e d t h e o p p o s i t e c o m p o n en t v a r i a b l e s (F ig u re 10 ). e ffe c ts o f th e tw o I t s form was s i m i l a r t o t h a t o f t h e income v a r i a b l e b u t th e s lo p e o f t h e c u r v e was s t e e p e r , e s p e c i a l l y i n th e p e rio d a f te r 1960. D u rin g t h i s p e r i o d p r i c e s w e re d e c r e a s i n g r e l a t i v e l y r a p i d l y and r e e d income was showing l a r g e g a i n s . The l a r g e i n c r e a s e i n r e l a t i v e b e e r p r i c e s i n 1979 tu r n e d t h e c u rv e downward. The * * s u b se q u e n t p r i c e d e c l i n e i n 1981 tu r n e d i t up a g a i n e v e n th o u g h incom e in 1 9 8 1 -1 9 8 2 was f a l l i n g . U sin g t h i s v a r i a b l e , t h e e f f e c t s o f b o th p r i c e and income could be in c lu d e d i n Model I I . T e s t in g M odel I I The a n a l y s i s o f Model I I was perform ed s i m i l a r l y t o Model I . The two b i n a r y v a r i a b l e s r e p r e s e n t i n g t h e l e g a l d r i n k i n g age c h ang e a n d t h e MBCDL w e re i n c l u d e d . Model I I was f i t t e d t o t h e d a t a f o r t h e same f o u r tim e p e r i o d s t h a t w ere u sed e a r l i e r . The t e s t s t a t i s t i c s i n d i c a t e t h a t Figure Q Michigan Beer P ric e Index (R e la tiv e t o the CPI-All Item s: D e t r o i t ) R e la tiv e P r ic e In d ex 1 1.0 9 8 7 1955 1960 1965 1970 Years 1975 1980 Figure 10 B i l l i o n s of 1967 $ ' s Price-Incom e V a ria b le (Income x RBPI) 45 40 35 30 25 20 15 1955 1960 1965 1970 Years 1975 58 each v a r ia b le i s s i g n i f i c a n t a t th e .0 5 l e v e l d u rin g e ac h tim e p e r io d w ith t h e e x c e p t i o n o f t h e a g e c h a n g e v a r i a b l e (T a b le 5 ) . Model I I d e s c r i b e s 94 p e r c e n t o f t h e v a r i a t i o n i n a c t u a l s a l e s f o r t h e s h o r t e s t p e r io d 1954-1971. T h is p e r c e n ta g e i n c r e a s e s t o o v e r 98 p e r c e n t f o r t h e f u l l 30 y e a r s tu d y p e r i o d . V ith p ric e s a n d in c o m e i n c o r p o r a t e d i n t h e m o d e l, t h e b i n a r y v a r i a b l e f o r lo w e rin g t h e l e g a l d r i n k i n g age was a s s ig n e d a n e g a t i v e and i n s i g n i f i c a n t c o e f f i c i e n t f o r th e t h e f i r s t t h r e e y e a r s o f t h e 18 y e a r o ld l e g a l a g e . The e f f e c t does become p o s i t i v e f o r t h e l o n g e r p e r i o d s , i n d i c a t i n g an i n c r e a s e i n s a l e s a s a r e s u l t o f t h e lo w e r d r i n k i n g a g e , b u t th e r e l a t i o n s h i p re m a in s i n s i g n i f i c a n t . Once a g a i n , t h i s v a r i a b l e was r e t a i n e d w ith o u t r e g a r d f o r i t s s t a t i s t i c a l s i g n i f i c a n c e b e ca u se th e r e l a t i o n s h i p was assumed t o b e t r u e f o r t h e l o n g e r p e r i o d s . I f th is a s s u m p t i o n a b o u t t h e b i n a r y age v a r i a b l e i s n o t made, th e c o e f f i c i e n t s f o r th e re m a in in g v a r i a b l e s a re s i m i l a r , a ll sig n ific a n t, and th e e x p la n a to r y power o f t h e model i s unchanged. Model I I h a s a h ig h d e g re e o f c o n s i s t e n c y among t h e c o e f f i c i e n t s fo r th e fo u r p e rio d s . added t o t h e s e r i e s , When t h e f i v e y e a r MBCDL p e r io d (1979-1983) i s th e c o e f f i c i e n t s re m a in a lm o st c o n s t a n t . The d e s c r i p t i v e po w er o f t h e m o del i n c r e a s e s m a r g i n a l l y from 9 8 .2 t o 9 8 .3 p e r c e n t o f t h e v a r i a t i o n i n s a l e s (F ig u r e 1 1 ). N u m e r o u s o t h e r v a r i a b l e s w e re t r i e d i n b o t h m o d e l s , b u t w e re r e j e c t e d f o r v a r i o u s r e a s o n s which a re summarized i n A p p e n d ix I I . m a jo r c r i t e r i a u s e d t o i n c l u d e v a r i a b l e s w e re s i g n i f i c a n c e v a ria b le s, The of th e s i m p l i c i t y o f fo rm , and e a s e o f u n d e r s t a n d i n g t h e t o t a l r e s u l t i n g m odel. 59 Table 5 HPdsl . I I Michigan, B e e r S a le s ( B a r r e l s x 1000) Ordinary. L e a s t Squa r e s R e g r e s s io n Period___________ I___________ II___________ I I I ___________________ I I Time Frame 1954- 1971 Column 1 R2 ( A d j.) .942 1954-1978 1954-1974 2 3 4 1954-1983 6 5 7 8 .975 .974 .983 .982 .956 .977 .983 9 .983 C o n sta n t (t s ta t.) 1586 ( 2 .4 ) 1544 ( 3 .2 ) 1506 (2 .4 ) 1248 (3 .0 ) 1410 (2 .5 ) 3149 (6 .8 ) 2836 (8 .3 ) 1136 ( 2 .7 ) 1325 ( 2 .3 ) Pop 18-44 (t s ta t.) 1 .089 (3 .8 ) 1.107 (5 .0 ) 1 .1 2 2 (4 .3 ) 1.248 (6 .4 ) 1 .187 (4 .8 ) .400 (1 .7 ) .627 ( 3 .6 ) 1.301 (6 .6 ) 1.234 (4 .9 ) P ric in c (t s ta t.) 3 .62 (5 .1 ) 3 .572 (5 .6 ) 3.56 (5 .4 ) 3 .1 6 3.193 (4 .8 ) (4 .7 ) 5 .2 5 0 (5 .8 ) 3 .8 0 (5 .2 ) 2 .9 3 (4 .4 ) 2.981 (4 .4 ) -10 (-1 .2 ) 4 2 .8 (.4 ) 4 Age (t s ta t.) 50 (.5 ) 320 (5 .1 ) MBCDL (t s ta t.) -5 5 2 (-5 .7 ) D urbin-W atson S ta tistic 1.5 1.5 1 .5 1.4 1 .4 .6 1 .2 1 .5 -487 (-3 .0 ) 1 .5 Pop 18-44: i s th e v a r i a b l e f o r th e M ichigan p o p u l a t i o n 18 th ro u g h 44 y e a r s o ld ( i n tho usand s). P r i c i n c : i s t h e i n t e r a c t i v e v a r i a b l e e q u a l t o th e M ichigan p e r s o n a l income ( c o n s t a n t d o l l a r s ) tim e s th e i n v e r s e o f t h e r e l a t i v e M ichigan b e e r p r i c e in d e x . * F ig u r e 11 MODEL I I A ctual and F i t t e d Michigan Beer S a le s Thousands of Barrels P r o je c te d S a le s 7500 7000 A c tu a l S a le s 6500 F i t t e d fr o m M o d e l I I 6000 5500 AGE MBCDL DECREASE AGE INCREASE 5000 1955 1960 1965 1970 Years 1975 1980 1983 61 R e s u lt s , o f M odel I I The b e s t e s t i m a t e o f Model I I f o r M ichigan b e e r s a l e s i s : M ichigan B eer S a l e s (B a rre ls) 1,325*000 ( a c o n s t a n t term ) 1 .234 (x ) P o p u la tio n 18-44 ]_______________ .00298 (x ) P e r s o n a l Income (x ) R e l a t i v e B eer P r ic e In d e x 5 0 ,0 0 0 D u ring e a c h y e a r l e g a l d r i n k i n g age was lo w e r (1972-1978) 4 8 7 ,0 0 0 D urin g e a c h y e a r o f MBCDL (1979-1983) The in d e p e n d e n t v a r i a b l e s a r e a l l s i g n i f i c a n t a t th e .0 5 l e v e l i n a l l f o u r tim e p e r i o d s w ith th e e x c e p t i o n o f t h e b i n a r y v a r i a b l e t o r e p r e s e n t t h e lo w e r d r i n k i n g age d u r i n g t h e p e r i o d 1972-1978 (T a b le 6 ) . The c o e f f i c i e n t o f d e t e r m i n a t i o n i s . 9 8 3 f o r t h e f u l l t h i r t y y e a r s modeled. The s t a b i l i t y o f t h e c o e f f i c i e n t s a s s i g n e d t o th e v a r i a b l e s o v e r tim e fram e s w ith d i s t i n c t l y d i f f e r e n t s a l e s p a t t e r n s add t o th e r o b u s t n e s s o f t h e m odel. Model I I p r e d i c t s a n e g a t i v e e f f e c t f o r th e MBCDL. The b e s t e s t i m a t e o f t h a t e f f e c t i s a r e d u c t i o n o f 4 8 7 ,0 0 0 b a r r e l s p e r y e a r . The b e s t e s t i m a t e o f t h e e f f e c t o f t h e lo w e r l e g a l d r i n k i n g age i s t o add 5 0 ,0 00 b a r r e l s p e r y e a r . PAsdMSSign A p ro je c tio n of a ll th e i n d e p e n d e n t v a r i a b l e s w as made t o i l l u s t r a t e t h e dynamic sy stem r e p r e s e n t e d i n t h e m odel. g r o w in g s t e a d i l y B eer s a l e s were t h r o u g h t h e 16 y e a r p e r i o d p r i o r t o im p le m e n ta tio n o f th e MBCDL ( r e f e r r e d t o e a r l i e r a s P h a s e I I ) . I f th e f a c t o r s in th e m odel a c c u r a t e l y p r e d i c t s a l e s , a p r o j e c t i o n o f e ach o f t h e s e v a r i a b l e s 62 lafeiaJi Summary, o f Model I I M ichigan Be e r S a le s ( B a r r e l s x 1000) O rd in a ry L e a s t S q u ares R e g r e s s io n fer_ipfl____________ I ____________ U ____________ I I I __________ I I Time Frame 1954-1974 1954-1978 1954-1971 1954-1983 Column 4 1 2 .942 .974 C o n sta n t (t s t a t .) 1586 (2 .4 ) 1506 (2 .4 ) 1410 (2 .5 ) 1325 (2 .3 ) Pop 18-44 (t s ta t.) 1.089 (3 .8 ) 1 .1 2 2 (4 .3 ) 1.187 (4 .8 ) 1.234 (4 .9 ) 3.6 2 (5 .1 ) 3.56 (5 .4 ) 3 .1 9 3 (4 .7 ) 2.981 (4 .4 ) -10 (-1 .2 ) 4 2 .8 (.4 ) 50 (.5 ) R2 ( A d j.) P ric in c (t s ta t.) • Age (t s t a t .) 3 .982 MBCDL (t s ta t.) D urbin-W atson S ta tistic • 983 -4 8 7 (-3 .0 ) 1.5 1 .5 1 .4 1 .5 63 o v e r t h e y e a r s 1979-1983 p r o v id e s th e d a t a b ase f o r p r o j e c t i n g M i c h i g a n b e e r s a l e s un der th e a ssu m p tio n t h a t e s t a b l i s h e d t r e n d s rem ained a s th e y w ere i n th e p r e v io u s 16 y e a r s . For exam ple, i n m o d e lin g t h e s y s t e m a s th o u g h n o t h i n g changed d u r in g t h e p r o j e c t e d p e r i o d , i t was n e c e s s a r y t o assume t h a t t h e l e g a l age was s t i l l 18 and o v e r , a n d t h a t d e p o s i t s on c o n t a i n e r s were n o t m a n d ato ry . The d i f f e r e n c e betw een p r o j e c t e d s a l e s and p r e d i c t i o n s b a s e d on th e r e a l 1979-1983 v a lu e s f o r t h e v a r i a b l e s shows how much e a c h c o n t r i b u t e d t o t h e d e c l i n e i n M ic h i g a n b e e r s a l e s ( F ig u r e 1 2 ). re m a in e d t h e same i n M i c h i g a n , t h e m odel p r o j e c t e d m i l l i o n b a r r e l s i n 1983. a c tu a l I f t h e system had sa le s of over 8 The d i f f e r e n c e betw een t h e p r o j e c t i o n and t h e s a l e s o f 6 . 9 m i l l i o n b a r r e l s was d i v i d e d j u s t a b o u t e v e n l y betw een MBCDL and non-MBCDL r e l a t e d f a c t o r s . The p o p u l a t i o n 18-44 f a c t o r , which was s u r e l y u n r e l a t e d t o e i t h e r t h e MBCDL o r t h e l e g a l ag e c h a n g e , p r e d i c t e d t h a t b e e r s a l e s would grow a t a slo w er r a t e d u rin g 1 9 8 0 -8 3 t h a n d u r i n g t h e p r e v i o u s 16 y e a r s . D uring 1979, however; t h i s f a c t o r p r e d i c t e d s a l e s above th e t r e n d . The s m a l l e s t p o r t i o n o f t h e d i f f e r e n c e was a t t r i b u t e d t o t h e l e g a l age ch an ge. T h is was e s t i m a t e d a t 5 0 ,0 0 0 b a r r e l s p e r y e a r . The p r ic e - in c o m e v a r i a b l e p r e d i c t e d a d e c l i n e o f 137,000 b a r r e l s i n 1979 and b e tw e e n 23 0 t o 2 5 0 th o u s a n d b a r r e l s i n each o f t h e l a s t f o u r years. Increased p r i c e s i n 1980 w e re som ew hat o f f s e t by i n c r e a s i n g income, w h ile i n 1981-1983 f a l l i n g p r i c e s o f f s e t a d e c l i n e i n incom e. p o rtio n o f th e d e c lin e in t h i s p ric e -in c o m e v a r ia b le r e s u l t e d A fro m h i g h e r p r i c e s a s s o c i a t e d w ith t h e MBCDL and t h u s would be a t t r i b u t a b l e t o t h e law r a t h e r th a n c h an g e s i n th e economy. The MBCDL was th e m ajo r v a r i a b l e and e x p l a i n e d 48 7,000 b a r r e l s per y e a r o f t h e d i f f e r e n c e betw een p r o j e c t e d and p r e d i c t e d s a l e s . I t was a b i n a r y v a r i a b l e , and t h e r e f o r e m easured t h e e f f e c t o f a l l o t h e r changes i n th e sy stem t h a t o c cu red f o r t h e f i r s t tim e i n 1979* I n c o n t r a s t , th e e f f e c t o f t h e MBCDL o p e r a t i n g t h r o u g h p r i c e i n c r e a s e s was e x p l i c i t l y measured by t h e p ric e -in c o m e v a r i a b l e and was an a d d i t i o n a l e f f e c t o f t h e law on s a l e s . Figure 12 1 P r o je c tio n o f Michigan Beer S a le s 1979-1983 Based on E s ta b lis h e d Trends f o r each V a ria b le . Compared w ith A c tu al Values f o r each V a ria b le : Model I I Thousands of Barrels 8000 P r o j e c t i o n Based on 1963-1978 Trends P o p u la tio n ’Legal Age Change P r ic e and Income 7500 MBCDL P r o j e c t i o n Based -on Model I I 7000 A c tu al S a le s 6500 1 *■ ■■ — ......... 1971 1973 1975 ..........— -------- — 1977 1979 1 1981 — Xaars_ 1983 * The s o l i d l i n e a t the top was made by p r o j e c t i n g th e tre n d i n each independent v a r i a b l e (1963-78 base) and u s in g th e p r o je c tio n s to p r e d i c t 1979-83 s a l e s . This p o r tr a y s exp ected s a l e s i f e v e ry th in g had remained as i t was d u rin g the p rev io u s 16 y e a rs . The d is ta n c e between th e upper and low er l i n e s f o r each v a r i a b l e shows how much of th e d e c lin e i n b e e r s a l e s can be a t t r i b u t e d to each v a r i a b l e i n Model I I , when v a lu e s computed on th e a c t u a l d a ta were compared w ith the tre n d p r o je c te d d a ta . 65 A s s o c ia t i v e . M odel S a l e s o f b e e r i n M ich ig an w ere a l s o compared t o b e e r s a l e s i n th e f o u r s u r r o u n d i n g s t a t e s o f t h e N o r t h - C e n t r a l c e n s u s r e g i o n ( F ig u r e oh 13 ). The r e g i o n i n c l u d e s Ohio, I n d i a n a , I l l i n o i s , and W isc o n s in , a l l o f which s h a r e common b o r d e r s w ith M ichigan. 1983) was a n a l y z e d . A 30 y e a r p e r io d (1 9 5 4 t o The a v e r a g e o f t h e f o u r s t a t e s a n n u a l b e e r s a l e s was u s e d t o p r e d i c t M ichigan s a l e s u s i n g a l i n e a r m u l t i p l e r e g r e s s i o n te c h n i q u e . An " a s s o c i a t i v e m o d e l" was d e v e l o p e d t o d e t e r m i n e i f a p a t t e r n e x i s t e d betw een r e g i o n a l b e e r s a l e s and M ic h i g a n s a l e s . S u c h a m o d el c o u l d n o t be u s e d t o e x p l i c i t l y e x p l a i n M i c h i g a n b e e r s a l e s b e c a u s e c h an g e s i n r e g i o n a l s a l e s o b v i o u s l y do n o t c a u s e c h a n g e s i n M ic h i g a n s a le s. However, i f a p a t t e r n d i d e x i s t , i t m ig h t be e x p e c te d t o e x ten d beyond t h e c r i t i c a l y e a r o f 1 9 7 8 i f a l l o t h e r t h i n g s r e m a i n e d e q u a l . Two t h i n g s w e re c l e a r l y n o t e q u a l , however; t h e M ichigan MBCDL and th e change i n M ichigan l e g a l d r i n k i n g a g e . The i n c r e a s e i n l e g a l d r i n k i n g age i s e x p l i c i t l y a c c o u n te d f o r i n t h e a s s o c i a t i v e m odel. T here i s a v e ry h ig h d eg re e o f s i m i l a r i t y M ichigan and t h e r e s t o f t h e r e g i o n (T a b le 7 ) . b e tw e e n t h e s a l e s i n I n th e p e r io d 1954-1971. 97% o f t h e v a r i a t i o n i s r e l a t e d t o r e g i o n a l s a l e s . c o v e rin g th e 18 y e a r o l d minimum l e g a l a g e , b in a ry age v a r i a b l e i s b o th s i g n i f i c a n t e stim a te d 1 7 0 -1 9 0 D u rin g th e p e r io d s t h e c o e f f i c i e n t f o r th e and s t a b l e . It a d d s an th o u s a n d b a r r e l s t o s a l e s e ach y e a r betw een 1 9 7 2 and 1978. I n t h e A s s o c i a t i v e M o d e l, M ic h ig a n s a l e s w ere f i t t e d t o r e g i o n a l s a l e s f o r t h e 1954-1978 p e r i o d and t h e v a r i a b l e f o r t h e l e g a l age change was in c l u d e d ( F ig u r e 1 4 ) . 1979-1983. T h is a e r i e s was t h e n p r o j e c t e d o v e r t h e y e a r s The b in a r y ag e v a r i a b l e dropped from 190,000 b a r r e l s i n 1978 t o 0 f o r t h e p r o j e c t e d p e r i o d when th e l e g a l d r i n k i n g age r e v e r t e d t o 21. The c o e f f i c i e n t s f o r t h e c o n s t a n t term and r e g i o n a l s a l e s r e m a i n e d t h e same f o r t h e p r o j e c t i o n ( o b v io u s ly t h e s e r i a l c o r r e l a t i o n f a c t o r i s n o t m ean in g fu l f o r a p r o j e c t i o n ) . T h is p r o j e c t i o n show s t h e l e v e l o f s a l e s which m ight be e x p e c te d i n M ichigan b a s e d on th e 25 y e a r s o f p r i o r e x p e rie n c e in th a t re g io n . P ro je c te d s a le s co n tin u e d to i n c r e a s e th ro u g h 1981 when a c t u a l s a l e s w ere 10 p e r c e n t below t h e p r o j e c t i o n . 66 Figure 13 N o r t h - C e n t r a l R egion S t a t e s B eer Sakes I n d i c e s (1967 ** 100) o f 1967 Year 160 / S' ''‘I n d ia n a / / I i 150 W is c o n s in 140 Illin o is Ohio 130 120 M ichigan 110 100 90 80 i- i i i i 1955 1960 1965 - 1—i-..i—i- i i i i—i—i—i—i— w Y ears 1970 1975 1980 1983 67 Table 7 A s s o c i a t i v e Model R e l a t i n g M ichigan B eer S a le s t o N o r th - C e n tr a l R eg io nal Average S a l e s f B a r r e l s x 1000) F i r s t - O r d e r S e r i a l C o r r e l a t i o n C o r r e c t i o n R e g r e s s io n Technique P e rio d ____________ I ____________ I I ____________ I I I _____________________ EL Time Frame 1954-1974 1954-1 9 8 3 1954--1978 1954-71 Column 1 R2 ( A d j.) .975 C o n sta n t (t s ta t.) 513 (.9 ) NCBA (t s ta t.) 1.115 (9 .3 ) 2 3 4 5 6 7 8 .974 .961 .968 .838 .9 30 .937 .947 456 (1 .0 ) 685 (1 .9 ) 1056 (2 .9 ) 2661 (3 .6 ) 2171 ( 5 .2 ) 1158 (2 .7 ) 1472 ( 3 .5 ) 1.221 1.128 1.083 .995 ( 1 2 .2 ) ( 1 1 .4 ) ( 1 5 .1 ) ( 1 3 .0 ) .657 (4 .7 ) .904 .981 .745 ( 9 .4 ) (1 1 .4 ) ( 1 0 .4 ) .969 59 (.1 ) Age (t s ta t.) 190 (2 .1 ) 171 (2 .0 ) D urbin-W atson S ta tistic .699 (4 .4 ) 1.8 .7 1 0 (4 .8 ) .686 (4 .4 ) 1 .8 1 .9 .714 (5 .2 ) .678 (4 .5 ) 1.6 1 .7 208 (2 .0 ) 368 (4 .8 ) MBCDL (t s ta t.) Rho (t s ta t.) 9 .894 .796 (1 2 .9 ) ( 7 . 4 ) 1 .3 1.8 -6 0 0 (-5 .2 ) -395 (-2 .5 ) .776 (7 .0 ) .728 ( 5 .8 ) 1 .9 2 .0 NCBA: i s th e a v e ra g e o f I l l i n o i s , I n d i a n a , Ohio and W isc o n sin b e e r s a l e s i n th o u s a n d s o f b a r r e l s . Figure 14 A s s o c ia tiv e Model A ctual and F i t t e d Michigan Beer S ales 1954-8 3 w ith 1979-82 P r o je c tio n Thousands of Barrels P r o je c tio n 75Q0 700G A ctual Sales F i t t e d from Model 6500 6000 5500 w 1955 1960 1965 1970 Years AGE MBCDL DECREASE AGE INCREASE 1975 1980 1983 69 R e s u l t s o f t h e Asso c i a t i v e Model When t h e f u l l t i m e p e r i o d was used t h e A s s o c i a t i v e Model p ro v id e d e s t i m a t e s f o r b o th b i n a r y v a r i a b l e s . s a l e s by 3 7 6 , 0 0 0 b a r r e l s p e r y e a r . The MBCDL was e s t i m a t e d t o r e d u c e The lo w e r l e g a l d r i n k i n g age was e s t i m a t e d t o i n c r e a s e s a l e s by 190,000 b a r r e l s p e r y e a r , f o r t h e y e a r s 1972 t h r o u g h 1978. t h i s model. T h is means t h a t B3% o f th e e r r o r i n p r e d i c t i o n d u r i n g e a c h y e a r w as c o r r e c t e d th e e r r o r ) The s e r i a l c o r r e l a t i o n c o r r e c t i o n f a c t o r was .83 i n ( a d d e d o r s u b t r a c t e d depend ing on th e d i r e c t i o n o f in th e fo llo w in g y e a r 's e s tim a te . As a r e s u l t o f t h i s c o r r e c t i o n f a c t o r th e MBCDL b in a r y v a r i a b l e e s t i m a t e i s c o n s e r v a t i v e . Summary o f Model R e s u l t s i T h r e e m o d e ls f o r b e e r c o nsu m ption i n M ichigan have been p r e s e n t e d . Model I in c l u d e d two p r e d i c t o r s b a s e d on s i g n i f i c a n t s e g m e n t s o f t h e p o p u l a t i o n and t h e u n e m p lo y m e n t r a t e a s an economic i n d i c a t o r . T h is model p r e d i c t e d s a l e s f o r t h e 30 y e a r p e rio d w ith 99 p e r c e n t a c c u r a c y . The m od el was e s p e c i a l l y a c c u r a t e i n p r e d i c t i n g s a l e s f o r t h e l a s t f i v e years. Given th e a b ru p t i n c r e a s e i n th e r e l a t i v e b e e r p r i c e when t h e MBCDL to o k e f f e c t , a second model was c o n s t r u c t e d i n c l u d i n g p r i c e and p e r s o n a l in c o m e a s a n i n t e r a c t i v e p r e d i c t o r v a r i a b l e . Model I I a l s o p r e d i c t s o v e r 98 p e r c e n t o f t h e change i n b e e r consum ption o v e r t h e t h i r t y y e a r p e r io d . B a s e d o n t h e s e s t a t i s t i c a l m o d e ls , a ra n g e c a n be d e te rm in e d f o r t h e b e s t e s t i m a t e o f t h e e f f e c t o f b o th t h e MBCDL and t h e l e g a l d r i n k i n g age change i n M ich ig an . The MBCDL i s e s t i m a t e d t o have r e s u l t e d i n a d e c l i n e o f betw een 34 6,0 00 b a r r e l s p e r y e a r fr o m Model I a n d 4 8 7 , 0 0 0 b a r r e l s p e r y e a r fro m Model I I . These e f f e c t s w ere s i g n i f i c a n t a t th e .05 l e v e l i n e ach c a s e . The p r e d i c t e d e f f e c t o f t h e change i n each demand v a r i a b l e i n Model I I was d e v elo p e d from t r e n d s e s t a b l i s h e d d u r i n g t h e y e a r s 1963-1978. If t h e e f f e c t o f ' t h e p r i c e i n c r e a s e d u r i n g 1 9 7 9 , w h ic h exceeded normal i n f l a t i o n a r y i n c r e a s e s , i s a s s i g n e d t o th e MBCDL, t h e d i f f e r e n c e betw een a c t u a l a n d p r e d i c t e d s a l e s i s a l m o s t 5 0 0 ,0 0 0 b a r r e l s o r 7 p e r c e n t of sa le s. The p r e d i c t e d e f f e c t o f t h e law rem ained c o n s t a n t a t 7 p e r c e n t p e r y e a r f o r 1 9 8 0 -1 9 8 3 . Model I and t h e A s s o c i a t i v e MOdel, based on 70 r e g i o n a l s a l e s t r e n d s , both e s t i m a t e d t h e e f f e c t o f t h e MBCDL on s a l e s t o be a 5 p e r c e n t an n u al d e c l i n e . The e f f e c t o f l o w e r i n g t h e l e g a l d r i n k i n g a g e fr o m 21 t o 18 i s e s t i m a t e d t o have i n c r e a s e d s a l e s by 96,00 0 b a r r e l s p e r y e a r i n M odel I and 5 0 ,0 0 0 b a rre ls per year s ig n i f i c a n t a t even th e research ers' b e lie f i n Model I I . .8 l e v e l , th a t th e These f i g u r e s a r e n o t b u t w e re i n c l u d e d b e c a u s e o f t h e r e l a t i o n s h i p w as a t r u e o n e . T h is a ssu m p tio n re d u c e d th e e s t i m a t e d e f f e c t s o f th e MBCDL, th u s d i m i n i s h i n g t h e r i s k o f o v e r s t a t i n g t h e e f f e c t o f t h e MBCDL on s a l e s . Illin o is r a i s e d i t s l e g a l d r i n k i n g age from 19 t o 21 o n J a n u a r y 1 , 1 9 8 0 . B eer s a l e s c o n tin u e d t o i n c r e a s e i n b o th 1980 and 1981 ( f i g u r e 1 3 ). The A s s o c i a t i v e Model was c o n s t r u c t e d t o r e l a t e M i c h i g a n s a l e s t o s a l e s i n t h e f o u r s u r r o u n d in g s t a t e s o f t h e N o r th - C e n tr a l c e n s u s r e g i o n . T h is A s s o c i a t i v e Model showed t h a t s a l e s i n M ichigan w ere h i g h l y s i m i l a r t o r e g i o n a l s a l e s fro m 1954 th r o u g h 1978. The d ro p i n M ichigan s a l e s d u r in g 1979 was a s i g n i f i c a n t d iv e r g e n c e from th e r e g i o n a l t r e n d s , where a v e r a g e s a l e s c o n tin u e d t o i n c r e a s e th ro u g h 1981. The age v a r i a b l e was s i g n i f i c a n t i n t h i s m o d e l, s u p p o r t i n g t h e d e c i s i o n t o r e t a i n i t p r e v io u s m o d e ls. in G iven t h e go od ness o f f i t f o r t h e 25 y e a r s p r e c e d in g th e MBCDL, t h e r e was no r e a s o n t o e x p e c t t h e d e c l i n e i n M io h ig a n s a l e s e x p e r ie n c e d s i n c e 1979 b a se d on r e g i o n a l s a l e s . m when t h e i n c r e a s e i n can s a l e s slow ed, b o t t l e s a l e s w ere s t a b l e . B o ttle s a l e s b e g a n t o grow i n 1977» and i n p e rc e n t over th e p re v io u s y e a r . 1979 t h e y i n c r e a s e d 50 S i n c e 1 9 8 0 , b o t t l e s a l e s h ave been d e c lin in g . The p a c k a g e mix f o r t h e f o u r y e a r s b e f o r e and f o u r y e a r s a f t e r t h e MBCDL (1975-1982) i s p r e s e n t e d i n T a b le 10. Only two o f th e t h r e e g l a s s c o n t a i n e r s t y p e s w e re b e i n g u s e d i n M ichigan p r i o r t o th e MBCDL. The 4 - t r i p r e f i l l a b l e b o t t l e f i r s t a p p ea re d i n 1979 and was th e same b o t t l e F a l s t a f f u s e d a s a n o n - r e f i l l a b l e i n 1978 w i t h t h e a d d i t i o n o f t h e r e q u i r e d M ichigan R e fu n d l a b e l . T h is b o t t l e i s o t h e r s t a t e s a s a n o n - r e f i l l a b l e c o n t a i n e r . 37 s till b e in g used in A nheuser-B usch in tr o d u c e d t h e i r p r o p r i e t a r y 4 - t r i p b o t t l e i n 1981, g i v i n g im p o rtan c e t o t h i s t y p e of c o n tain er. The MBCDL l e d t o m a jo r im m ediate s h i f t s i n t h e m arket s h a r e o f t h e v a r i o u s c o n t a i n e r s ( F ig u r e 1 6 ). 9 p e rc e n t in 1979. The t o t a l number o f packages dropped by A l l o f t h a t d e c l i n e came fro m c a n s a l e s w h ic h dropped 44 p e r c e n t from t h e i r 1978 l e v e l s . R e f i l l a b l e b o t t l e s a l e s more t h a n d o u b l e d a s t h e y o n c e a g a i n w e re s t o c k e d o n r e t a i l e r * s s h e l v e s . D w indling o f f - p r e m i s e s a l e s o f b e e r i n r e f i l l a b l e b o t t l e s d u rin g th e 196 0 s h a d v i r t u a l l y e l i m i n a t e d t h i s c o n t a i n e r fro m r e t a i l s to re s. N o n - r e f i l l a b l e b o t t l e s , u n e x p e c te d ly , m a in ta in e d s a l e s a f t e r t h e MBCDL and t h e r e f o r e g a i n e d a l a r g e r s h a r e o f t h e s h r i n k i n g m a rk e t. These chang es a r e d i s c u s s e d i n more d e t a i l below . The i n c r e a s e i n n o n - r e f i l l a b l e b o t t l e s i n 1977 and 1978 f o ll o w s a n a t i o n a l t r e n d tow ard more o n e -w a y g l a s s c o n t a i n e r s . re ta in e d i t s a b so lu te p o s itio n in y e a r s o f t h e MBCDL. T h is c o n ta in e r th e m arket d u rin g th e f i r s t th re e I n 1982, th e A nh eu ser-B u sch c o n v e r s io n o f i t s p o p u l a r M ic h e lo b b r a n d t o n o n -re filla b le b o ttle s . a 4 - t r i p b o t t l e re d u c e d t h e m a rk e t s h a r e o f S a le s of beer in n o n - r e f i l l a b l e b o ttle s, • lafelJL-ia Michigan Package Mix by C o n tain er Type and Market Share (C o n ta in e rs i n 1 0 0 0 's o f c ase s o f 24 c o n ta i n e r s ) C o n tain er Type . 1975 1976 1977 | 1978 1979 1980 1981 1982 26,453 33.3* 23,285 30.6* 20,678 28.2* 14,485 20.0* 744 .9* 854 1.1* 1,239 1.7* 8,644 12.0* 1 19-T rip R efilla b le B o ttle C o n ta in ers Market Share 8,500 10.1* 4 -T rip R efilla b le B o ttle C o n ta in ers Market Share -0 - -0- -0- -0 - N o n -R e filla b le B o ttle s C o n ta in ers Market Share 16,000 1 9 .OX 16,077 18.8* 18,005 20.5* 21,325 24.4* 21,292 26.8* 21,815 28.7* 20,935 28.5* 14,242 19.7* T o tal B o ttle s C o n tain ers Market Share 24,500 29.2% 24,343 28.5* 27,090 30.9* 32,103 36.7* 48,519 61.1* 45,955 60.4* 42,852 58.4* 37,371 57.7* Cans C o n ta in ers Market Share 59,513 70.8* 61,198 71.5* 60,688 69.1* 55,414 63.3* 30,792 38.8* 30,168 39.6* 30,538 41.6* 33,933 46.9* C o n ta in ers 84,013 85,540 87,778 87,517 79,380 76,123 73,390 72,294 T o tal Package 8,266 ... 9 .7 * 9 ,0 8 s! 10,778 10.3* 12_. 2* 82 Figure 16 M ic h ig a n M ark et S h a re by P ack age Type 4 -T r ip R e f i l l a b l e B o t t le N o n -R e filla b le B o ttle 1 9 -T r ip R e f i l l a b l e B o t t l e c M ichigan Brewer P rice In d e x Cans P ro d u c e r P rice In d e x f o r B eer i n Cans M ichigan W ho lesale B eer P r i c e In d e x Cans Consumer P rice In d e x f o r B eer M ichigan R etail B eer P r ic e In d e x Cans 1976 MAR 100 SEPT (100) 100 100 100 (100) 100 101 100 100 1977 MAR SEPT 105 105 102 103 103 106 101 102 106 106 1978 MAR SEPT 107 110 105 109 111 115 106 110 111 115 1979 MAR SEPT 115 116 113 119 123 130 117 120 133 141 1980 MAR SEPT 120 123 125 130 141 143 128 134 153 155 1981 MAR SEPT 127 131 135 137 151 151 139 142 163 163 1982 MAR 131 140 151 146 163 148 SEPT 131 148 151 148 1983 MAR 136 148 162 152 163 148 172 161 SEPT 141___________ 154___________ 162____________ 156____________ 157_________ Numbers i n p a r e n t h e s i s a r e e s t i m a t e d . D uring 1982 and i n t o 1 9 8 3 t h e r e w ere two d i s t i n c t r e t a i l p r i c e s t r a t e g i e s f o r b e e r s o l d i n s u p e r m a r k e ts i n F l i n t , M ichigan. At a b o u t th e same tim e r e t a i l p r i c e a d v e r t i s i n g became l e g a l a l a r g e number o f s u p e rm a rk e ts re d u c e d t h e p r i c e o f b e e r one d o l l a r a c a s e . B oth p r i c e s a r e i n d i c a t e d f o r e a c h tim e p e r io d . Figure 18 R e l a t i v e M ic h ig a n B e e r P r i c e In d ices^ * ) 6 /1 2 B o t t le Package P ercent of B ase In d ex 115 r — W h o le sa le P r ic e In dex R a tio 110 105 R e t a il P r ic e Index R a tio 100 C P I(for R e ta il p r ic e s ) P P I ( f o r W h o le s a le and B rew er p r i c e s ) 1976 1977 1976 1979 1980 19 8 1 •B rew er P r i c e I n d e x R a t i o MBCDL (I ) R a t io o f M ic h ig a n P r i c e I n d i c e s to N a t io n a l P r i c e I n d i c e s 90 Figure 19 Percent o f B ase In dex R e l a t i v e M ic h ig a n B e e r P r i c e I n d i c e s ( D 1 2 / 1 2 Can P a c k a g e 115 110 105 W h o le sa le P r ic e In d ex R a tio 100 CPI ( f o r R e t a i l p r i c e s ) 1PPI ( f o r W h o l e s a l e a n d B rew er p r i c e s ) 1976 1977 1978 \ s 1979 1980 1981 1982 1983 R e t a il P r ic e Index R a tio MBCDL B rew er P r i c e In d ex R a tio ( | ) R a tio o f M ic h ig a n P r i c e I n d i c e s to N a t i o n a l P r i c e I n d i c e s 104 The s t o r e s f o ll o w i n g e a c h s t r a t e g y were a v erag e d s e p a r a t e l y . 1982 and a g a i n i n P r i o r to 1983 s u p e r m a r k e t s h e l f p r i c e s v a r i e d o n ly s l i g h t l y around one a v erag e p r i c e . The r e t a i l p r i c e i n d e x f o r M ich ig an was s i m i l a r t o th e N a tio n a l p r i c e t r e n d b e f o r e t h e MBCDL ( F ig u re 9 o f t h e p r e v i o u s s e c t i o n o n B e e r S a le s). M ichigan p r i c e s i n c r e a s e d f a s t e r , how ever, th a n i n th e r e s t of t h e c o u n try d u r in g 1979 and 1980. S in c e th e n n a t i o n a l p r i c e s h a v e b e e n r i s i n g m ore r a p i d l y t h a n M ic h i g a n p r i c e s . I n t h e F a l l o f 1983 t h e r e t a i l p r i c e in d e x f o r b e e r i n M ichigan was a g a in e q u a l t o t h e n a t i o n a l average. W h o l e s a l e p r i c e s a l s o r o s e r a p i d l y d u r i n g 1979 and 1980. These p r i c e s have c o n tin u e d t o i n c r e a s e a t ab o u t th e same r a t e a s th e n a t i o n a l PPI s in c e th e n m a i n t a i n i n g t h e i r p r i c e d i f f e r e n t i a l . The p r i c e o f b e e r from t h e b r e w e r i n c r e a s e d a t a s l o w e r r a t e M ic h i g a n s i n c e t h e MBCDL th a n i t d i d n a t i o n a l l y . in The brew er p r i c e was a b o u t 5 in d e x p o i n t s ( p e r c e n t ) lo w e r d u r i n g t h e y e a r s 1980 th ro u g h 1982. T h e r e w as a m a j o r b r e w e r p r i c e i n c r e a s e f o r b o t t l e s i n 1 9 8 3 b u t can p r i c e s i n M ichigan rem ained w e l l below t h e n a t i o n a l a v e r a g e . P riv a te i n d u s t r y d a t a i n d i c a t e t h a t p r i c e i n c r e a s e s i n t h e e n t i r e N o r th - C e n tr a l Census R egion have been lo w e r t h a n th e n a t i o n a l r a t e o f c h a n g e i n b e e r p ric e s d u r i n g t h e p e r i o d b e t w e e n 1980 and 1983* in d ic a te th a t p r ic e s in th e re g io n w ere h e ld In d u stry so u rces dow n by t h e h ig h ly c o m p e t itiv e s i t u a t i o n among l a r g e b re w e rs . The w h o l e s a l e and r e t a i l m a rg in s in M ic h ig a n h av e c o n s i d e r a b l y o v e r t h e e i g h t y e a r p e r i o d (T ab le 1 5 ). d i f f e r e n c e b e tw e e n t h e p r i c e p a i d p e r c a s e o f b e e r re c e iv e d . changed The m a rg in i s t h e and th e p ric e I t m ust c o v e r a l l o t h e r e x p e n s e s , p lu s th e p r o f i t . In c u r r e n t d o l l a r s t h e w h o le s a le m arg in i n c r e a s e d fro m $ 1 . 3 3 P e r c a s e i n 1976 t o $ 3 . 1 0 p e r c a s e i n t h e S p r in g o f 1981. th re e d o lla r s per case sin c e th e n . I t has rem ain ed around The r e t a i l m a r g i n i n c r e a s e d fr o m a r o u n d $ 1 . 0 0 b e f o r e t h e MBCDL t o $ 1 . 8 0 p e r c a s e d u r in g t h e f i r s t s i x months o f 1979. I t c o n tin u e d t o r i s e u n t i l t h e s p r i n g o f 1981 when i t re a c h e d $ 2 .1 3 p e r c a s e . I n 1982, when h a l f o f t h e r e t a i l m arket lo w ered i t s p r i c e by a d o l l a r a c a s e , th e r e t a i l m a rg in f o r t h i s m a rk e t s e g m e n t was b a c k t o t h e pre-MBCDL l e v e l i n c u r r e n t d o l l a r s . The h i g h e r p r i c e d r e t a i l e r s lo w e re d t h e i r p r i c e s t o meet c o m p e t itio n i n 1983. 105 Table 15 G ross M argins f o r Packaged B eer In M ichigan 1076 - 1Q83 C u rre n t D o l l a r s 1967 D o l l a r s W holesale Margin R e ta il Margin W holesale Margin R etail Margin 1976 MAR SEPT $ 1.33 1.33 $ .9 0 .90 $ .7 8 .7 8 $ .53 .53 1977 MAR SEPT 1.28 1.46 1 .13 .95 .71 .80 .6 2 .5 2 1978 MAR SEPT 1.65 1 .79 1 .00 1 .03 .84 .9 2 .51 .53 —_ M R P T tf 1979 MAR SEPT 1.99 2 .3 4 1.80 1 .9 0 .92 1.0 8 .83 .87 1980 MAR SEPT 2.81 2 .7 8 2 .0 8 2 .0 9 1.11 1 .1 0 .82 .8 2 1981 MAR SEPT 3 .1 0 2 .9 3 2 .1 3 2 .1 3 1.14 1 .0 8 .84 .84 1982 MAR 2 .9 3 2 .1 3 1.13 1.01 .7 8 .41 SEPT 2 .93 2 .1 3 1 .13 1.01 .7 4 .39 1983 MAR 3 .3 0 2 .1 3 1.43 1 .09 3.07 1.13 1 .0 2 SEPT .37 ♦ 106 In d e f la te d 1967 d o l l a r s i t is c l e a r t h a t t h e r e t a i l m a r g in i n c r e a s e d i n i t i a l l y by 50 p e r c e n t when t h e MBCDL t o o k e f f e c t . re ta il 1982 p r i c e c o m p e t i t i o n h a s caused t h e m argin t o d e c l i n e so t h a t i n 198 3 th e r e t a i l m arg in was 3 0 p e r c e n t b e lo w t h e d o lla rs. S in c e 1976 le v e l in re a l The w h o l e s a l e m argin i n c r e a s e d by 40 p e r c e n t o v e r a two y e a r p e r io d s t a r t i n g i n t h e f a l l o f 1978. I n 1983» t h e w h o le s a le m a r g i n w as s t i l l 30 p e r c e n t h i g h e r th a n i n 1976 i n r e a l ( d e f l a t e d d o l l a r ) te r m s . D is c u s s io n T h e r e a r e two r e c u r r i n g q u e s t i o n s i n t h e d e b a t e on d e p o s i t law s which t h i s p r i c e s tu d y a d d r e s s e s . The f i r s t i s how p r i c e s c h a n g e d a t th e th re e l e v e l s i n th e d i s t r i b u t i o n c h a n n e l u n d e r M ic h i g a n 's MBCDL. The second q u e s t i o n i s how much does su ch l e g i s l a t i o n c o s t c o n s u m e r s i n t h e fo r m o f h i g h e r p r i c e s . F o llo w in g t h i s w i l l be a d i s c u s s i o n o f t h e e x t e n t t o which th e M ichigan p r i c e d a t a may h e l p p r e d i c t p r i c e e f f e c t s o f MBCDL i n o t h e r s t a t e s o r n a t i o n a l l y . The r e l a t i v e change i n b e e r p r i c e s i n M ichigan a t t h e t h r e e l e v e l s i n t h e d i s t r i b u t i o n system show t h e re s p o n se a t e ach l e v e l t o c h an g in g m arket c o n d i t i o n s d u r in g t h e e i g h t y e a r p e r io d ( F i g u r e s 20 and 2 1 ). The change i n t h e r e l a t i v e p r i c e o f b e e r a t th e r e t a i l l e v e l w i l l be d e f i n e d a s th e r a t i o o f th e r e t a i l p r i c e in d e x d i v i d e d by t h e w h o l e s a l e p r i c e in d e x . I f p r i c e s a t t h e two l e v e l s change p r o p o r t i o n a l l y o v e r tim e ( t h e e x p e c te d c o n d i t i o n i n a s te a d y s t a t e s y ste m ) t h e r a t i o betw een them w i l l be c o n s t a n t and e q u a l t o 1. Any change i n t h e r a t i o o f p r i c e t o c o s t o f goods s o l d w i l l c au se a d e v i a t i o n from 1. The r e l a t i v e w h o l e s a l e p r i c e in d e x i s s i m i l a r b u t u s e s t h e b rew er p r i c e in d e x a s a d i v i s o r . T here i s no c o s t o f goods s o l d t o u se i n form in g t h e r e l a t i v e brew er p r i c e in d e x . In ste a d , t h e PPI i s u s e d m a k in g t h e a ss u m p tio n t h a t i n a s t e a d y s t a t e sy ste m , M ichigan would r e f l e c t n a t i o n a l p r i c e t r e n d s . (T he b r e w e r ' s in d e x e s a r e i d e n t i c a l i n f i g u r e s 18 and 2 0 , and 19 and 2 1 . ) D uring 1976 and 1 9 7 7 t h e r e was l i t t l e change i n t h e r e l a t i v e p r i c e s i n t h e s y s t e m a s p r e d i c t e d by t h e s t e a d y s t a t e system a ss u m p tio n . 1 9 7 8 , p r i c e s a t t h e w h o le s a le l e v e l i n c r e a s e d w h o le s a le m a rg in . In i n d i c a t i n g an in c re a s e d I m m e d i a t e l y f o l l o w i n g im p le m e n ta tio n o f t h e MBCDL t h e r e was a l a r g e i n c r e a s e i n t h e r e l a t i v e r e t a i l p ric e . The r e t a i l Michigan B o t t l e P r i c e Index R a t i o s R e l a t i v e Change In Cross Margin f o r Michigan R e t a i l e r s , W ho les ale rs and Brewers P e r c e n t of Base Index 120 Wholesale B o t t l e P r i c e Index Brewer B o t t l e P r i c e Index 115 105 100 R e t a i l B o t t l e P r i c e Index Wholesale B o t t l e P r i c e Index 197 1978 MBCIH. N ote: 197 '•Brewer B o t t l e P r i c e Index P I' T' fo r Bol t i e Beer ( 1976= 100) I f t h e r a t i o s b e tw e en t h e p r i c e ch a rg ed (n u m era to r) and th e c o s t - o f - g o o d s s o l d (d en o m in a to r) rem a in c o n s t a n t , th e r a t i o l i n e s w i l l f o l l o w th e h o r i z o n t a l a x i s . I f th e p r i c e i n c r e a s e s r e l a t i v e to c o s t , th e c u r v e w i l l r i s e . I f th e p r ic e d e c r e a s e s r e l a t i v e to c o s t , th e c u rv e w ill fa ll. Figure 21 P ercent of B ase Index 120 M i c h i g a n Can P r i c e I n d e x R a t i o s R e l a t i v e C hange i n G ro ss M a rg in f o r M ic h ig a n R e t a i l e r s , W h o l e s a l e r s a n d B r e w e r s .• W h o l e s a l e Can P r i c e I n d e x B r e w e r Can P r i c e I n d e x 115 110 o oo 10 5 100 1976 1$77 1980 1978 MBCDL 1981 1982 R e t a i l C an P r i c e I n d e x W h o l e s a l e Can P r i c e I n d e x B r e w e r C an P r i c e I n d e x _____ P P I f o r C an B e e r ( 1 9 7 6 = 1 0 0 ) N ote: I f th e r a t i o s b e tw e e n t h e p r i c e c h a r g e d (n u m e r a to r ) and t h e ' t o s t - o f - g o o d s s o l d (d e n o m in a to r ) rem a in c o n s t a n t a t 1976 l e v e l s , t h e r a t i o l i n e s w i l l f o l l o w t h e h o r i z o n t a l a x i s . I f th e p r ic e in c r e a s e s r e l a t i v e to c o s t , th e c u rv e w i l l r i s e . I f th e p r ic e d e c r e a s e s r e l a t i v e to c o s t , th e curve w i l l f a l l . 109 m a r g in r e m a i n e d c o n s t a n t a t t h i s h i g h e r l e v e l u n t i l a second r e t a i l p r i c e s t r a t e g y emerged i n 1982 (o n ly su p e rm a rk e t p r i c e s were in c lu d e d i n t h e s a m p le ). T h is means t h a t i n 1982 some s t o r e s d e c r e a s e d t h e i r m argin ( r e l a t i v e t o t h e i r c o s t o f g o o d s s o l d ) t o b e lo w 1976 l e v e l s a s t h e w h o l e s a l e p r i c e w as c o n s t a n t . In 1983 i t c an be see n t h a t t h e h ig h e r p r i c e s t r a t e g y was abandoned a nd t h e e n t i r e r e t a i l m a r k e t w as a t , or below , 1976 m argin l e v e l s r e l a t i v e t o w h o le s a le p r i c e s . W h o lesale p r i c e s b egan i n c r e a s i n g i n 1977 and c o n tin u e d t o i n c r e a s e u n til 1980. The w h o l e s a l e m a r g i n h a s b e e n c o n s t a n t s i n c e t h e n . The r e l a t i v e b re w er p r i c e i n d e x e s h a v e b e e n b e lo w 1976 l e v e l s s i n c e t h e MBCDL, w i t h one e x c e p tio n (i.e ., th e b o ttle in d e x in th e f i r s t m easurem ent f o r 1983). To e s t i m a t e t h e p r i c e M ichigan b e e r consum ers p a id f o r t h e MBCDL, p r i c e d a t a (T ab le 12) was combined w ith t h e a n n u al s a l e s i n c a s e s (T ab le 10). A number o f a s s u m p tio n s w ere needed f o r t h i s a n a l y s i s . w as a s s u m e d t h a t t h e p r i c e o f b e e r i n M ic h i g a n d u r i n g F irst, i t th e p e rio d 1 9 7 9 -1 9 8 3 changed s i m i l a r l y t o t h e n a t i o n a l CPI f o r b e e r away from home ex cep t f o r th e e f f e c t o f t h e MBCDL. 5® The r a t i o s w ere r e c a l c u l a t e d , w ith 19 78 a s t h e b a se y e a r , t o e l i m i n a t e th e e f f e c t o f p r ic e changes p r i o r t o t h e MBCDL. The p r i c e in d e x r a t i o was a l r e a d y above t h e CPI i n 1977 and 1978. T h i s means t h a t i n f i g u r e s 18 and 19 t h e a r e a b e tw e e n a lin e p a ra lle l t o t h e h o r i z o n t a l a x i s a t t h e l e v e l o f t h e F a l l , 1978 R e t a i l P r i c e In d e x and t h e r e t a i l p r i c e i n d e x r a t i o w as c a u s e d by t h e MBCDL d u r i n g t h e y e a r s 1979 - 1 9 8 3 . S e c o n d , a l l p a c k a g e d b e e r was assumed t o be s o l d a t t h e i n d e x p r i c e s . a c tu a lly am ongst th e lo w e st fo r The s u p e r m a r k e t p r i c e s w e re b eer. If o th e r p ric e s m ov ed p r o p o r t i o n a t e l y t o s u p e rm a rk e t p r i c e s t h e n t h e p r i c e c h a n g e s w o u ld be sim ila r in a ss u m p tio n . form t o th o se used. H o w ev e r, t h i s w as a v e r y s t r o n g I n f a c t , c o n v en ie n c e s t o r e s s e l l a l a r g e volume o f b e e r i n M ic h i g a n and b e e r p r i c e s i n t h o s e s t o r e s m a i n t a i n e d t h e i r p o s i t i t o n r e l a t i v e t o w h o le s a le p r i c e s i n 1982 and 1983. The a s s u m p tio n s f o r t h e num ber o f c a s e s s o ld w ere enum erated i n t h e s e c t i o n on th e package mix. Annual M ichigan s a l e s f i g u r e s w ere u s e d , which means t h e d e r iv e d f i g u r e s w e re f o r a c t u a l co n su m e r e x p e n d i t u r e s . ^ F i n a l l y , i t was assumed t h a t h a l f o f t h e b e e r was p u rc h a s e d a t e a c h s e m i-a n n u a l p r i c e l e v e l f o r e a c h o f th e f iv e y e ars. 110 T h e C PI f o r beer consum ed a t home w a s u s e d i n f l a t i o n a r y p r i c e i n c r e a s e i n M ichigan b a s e d o n a c t u a l re ta il p ric e s. The r e s i d u a l s b e tw e e n t h i s to p r e d ic t th e 1978 M ic h i g a n p r e d i c t e d p r i c e and t h e a c t u a l p r i c e f o r e ach tim e p e rio d were a t t r i b u t e d t o f a c t o r s u n i q u e t o th e S ta te (Appendix V ). B eg in n in g i n 1979, t h e p r i c e p e r c o n t a i n e r f o r b e e r i n M ichigan i n c r e a s e d much f a s t e r t h a n i n f l a t i o n ( F ig u r e 2 2 ) . The i n c r e a s e i n t h e p r i c e o f c a n n e d b e e r i n 1979 was l a r g e r th a n t h a t f o r b o t t l e s a s th e r e t a i l p r i c e d i f f e r e n t i a l o f a b o u t $ 0 . 3 0 p e r c a s e f o r c an s was e l i m i n a t e d . ^ 0 The a c t u a l p r i c e o f b e e r i n M ich ig an was s i g n i f i c a n t l y above th e p r i c e p r e d i c t e d from n a t i o n a l t r e n d s d u r i n g t h e f i r s t t h r e e y e a r s a f t e r t h e MBCDL took e f f e c t . P r e d i c t e d b e e r p r i c e s , b a se d on n a t i o n a l t r e n d , however, have a lm o st c au g h t up t o t h e l e v e l o f M ichigan Superm ark et b e e r p r i c e s d u r in g 1982 and 1983. The amount p a id by M ichigan b e e r consum ers i n e x c e s s o f n a t i o n a l l y p r e d i c t e d p r i c e s r e a c h e d a h i g h o f $74 m i l l i o n i n 1980 ( F i g u r e 2 3 ) . T h e s e m e a s u re s o f t o t a l e x tr a .c o n s u m e r s p e n d in g w ere b a se d on t h e a c t u a l number o f c o n t a i n e r s p u r c h a s e d w h ic h d e c l i n e d e a c h y e a r 1979 th ro u g h 1982. year to year. The added p r i c e p e r c o n t a i n e r v a r i e d from T h i s a d d i t i o n a l p r i c e p e r c o n t a i n e r i n c r e a s e d fro m 2 . 7 c e n t s i n 1979 t o 3 . 8 c e n ts in 1980 and 3 . 6 c e n t s i n 1 9 8 1 , b u t th e n d e c r e a s e d back t o n e a r n a t i o n a l a v e r a g e i n f l a t i o n a d j u s t e d l e v e l s i n 1982 and 1983. Can p r i c e s w ere about 4 .5 c e n t s p e r c o n t a i n e r h i g h e r i n M ichigan th a n would be p r e d i c t e d by i n f l a t i n g 1978 p r i c e s d u r i n g each o f t h e f i r s t t h r e e y e a r s f o l l o w i n g t h e MBCDL. T h a t c o n su m e r b e e r p r i c e s r o s e , r e m a i n e d c o n s t a n t o r d e c l i n e d re la tiv e t o n a t i o n a l p r i c e l e v e l s a f t e r im p le m e n ta tio n o f a MBCDC c o u ld be e x p la i n e d by c u r r e n t t h e o r y . ra p id ly H o w ev er, t h e M ic h i g a n c a s e o f f i r s t i n c r e a s i n g p r i c e s a nd t h e n r e g r e s s i n g b a c k t o n a tio n a lly p re d ic te d l e v e l s a f t e r s e v e ra l y e a r s r e q u ir e s c lo s e a n a ly s is . The r e c e n t s t a g n a t i o n i n consumer b e e r p r i c e s i n M ichigan h a s been p r i m a r i l y t h e r e s u l t o f tw o f a c t o r s . A ll o f th e s t a t e s i n th e N o rth -C e n tra l Census Region have e x p e r ie n c e d s m a l l e r p r i c e i n c r e a s e s th a n t h e n a t i o n a l a v e ra g e (PPI) would p r e d i c t d u r i n g t h e p e r i o d fro m 1980 t h r o u g h 1 9 8 3 . As M ic h i g a n i s t h e o n l y MBCDL s t a t e i n t h e r e g i o n , t h e lo w e r b rew er ( F .O .B .) p r i c e s a r e p ro b a b ly caused by th e c o m p e t itiv e s i t u a t i o n i n t h e r e g i o n r a t h e r t h a n t h e M ic h i g a n d e p o s i t law . In a d d itio n , th e r e t a i l Ill Figure 22 Change in th e R e t a i l P r ic e o f M ic h ig a n B e er i n C u r r e n t D o l l a r s C e n ts /B o ttle BOTTLES 45 P r i c e C onsum er P a id in A d d itio n to In fla tio n In fla tio n a r y P r ic e In crea se P r e d ic te d by th e CPI f o r B e e r a t Home ■ 40 35 30 P r ic e Per B o ttle o f B eer S p rin g MBCDL C e n ts /C a n 1976 - 29.8c CANS 45 P r i c e C onsum er P a id in A d d itio n to I n fla tio n 40 In fla tio n a r y P r ic e In crea se P r e d ic te d by th e CPI f o r B e e r a t Home Home^ 35 30 - e 1976 1977 1978 1979 1980 1981 1982 1983 P r ic e P er~C an o f B eer S p rin g 1976 = 28.1c Figure 23 A n n u a l Am ount M i c h i g a n B e e r j C onsum ers P a id a f t e r 1978 a b o v e I n f l a t i o ^ T o t a l D o l l a r s and C en ts p e r C o n ta in e r of Dollars 74 Millions 112 YEAR C en ts Per C o n ta in e r 1. 2. 1979 1980 2 .7 3 .8 1 981 3 .6 1982 1983 0.1 0 .3 P r e d i c t e d c o n s u m e r e x p e n d i t u r e i s nu m ber o f p a c k a g e s p u r c h a s e d t i m e s 1 9 7 8 a c t u a l M i c h i g a n p r i c e i n f l a t e d w i t h t h e CPI f o r b e e r a t h o m e . T h e t a b l e r e p o r t s t h e d i f f e r e n c e b e t w e e n t h i s p r e d i c t i o n a n d a c t u a l c o n s u m e r s p e n d i n g o n b e e n . , based on supermarket p rices. C a u tio n m ust be u sed in e x t r a p o la t i n g t h e s e r e s u l t s to o t h e r a r e a s w it h o u t f u r t h e r v e r i f i c a t i o n . The s y s te m d o e s n o t a p p ea r s t a b l e . 113 m a r g i n s , w h ic h i n c r e a s e d d u rin g 1979 and 1980, have r e g r e s s e d o v e r th e la st tw o y e a r s back to pre-M BCDL l e v e l s . T h ere is a d e q u a te d o c u m e n t a t i o n o f a d d i t i o n a l c o s t s f o r r e t a i l e r i n h a n d l i n g m andatory r e t u r n s to c o n clu d e t h a t e i t h e r th e c u r r e n t r e t a i l m a rg in i s not c o v e r i n g c o s t s o r t h a t t h e i n i t i a l a s s u m p tio n o f a m a tu re i n d u s t r y i n t h e y e a r s p r i o r t o t h e MBCDL was i n v a l i d . M ost s t a t e s h a v i n g a MBCDL fi P c o m p e n s a te r e t a i l e r s a t l e a s t 1 c e n t p e r c o n t a i n e r as a h a n d lin g f e e . £ A r e c e n t summary o f t h e l i t e r a t u r e p r e p a r e d f o r t h e Governor o f New York when c o n s i d e r i n g t h e i r MBCDL e s t i m a t e d a c t u a l r e t a i l c o s t t o be 2 c e n t s p e r c o n t a i n e r . B a s e d on t h a t s tu d y t h e r e t a i l m argin i n M ichigan i s n o t s u f f i c i e n t t o m e e t t h e a d d i t i o n a l h a n d l i n g c o s t s im p o s e d by t h e MBCDL and b e e r s a l e s m u s t be c o n s i d e r e d a l o s s ite m s u p p o rte d by t h e s a l e o f o t h e r ite m s . T h e r e a r e numerous p e c u l i a r i t i e s i n p r i c i n g b e e r i n M ichigan which make i t o f l i m i t e d use i n p r e d i c t i n g t h e e f f e c t o f MBCDL on p r i c e s i n o th e r s ta t e s or n a tio n a lly . The M ichigan p a t t e r n needs t o be fo llo w e d f u r t h e r and e i t h e r v e r i f i e d o r shown t o be an anomaly i n com parison w ith o th e r d e p o sit s t a t e s . ■C.PllSju9lgng S u p erm ark et p r ic e s w ere su rv ey ed a t a l l t h r e e l e v e l s o f th e d i s t r i b u t i o n sy ste m d u r i n g t h e t h r e e y e a r s p r e c e d i n g and f i v e y e a r s f o l l o w i n g i m p l e m e n t a t i o n o f t h e MBCDL (1 9 7 6 -1 9 8 3 ). w e r e f o r t h r e e b r a n d s o f prem ium p r i c e d b e e r . The sample p r i c e s Premium b e e r h a d a 75 p e r c e n t m a rk e t s h a r e i n th e y e a r s f o l l o w i n g t h e MBCDL. A f t e r f o l l o w i n g n a t i o n a l t r e n d s d u r i n g t h e t h r e e y e a r s p r i o r t o th e MBCDL, w h o l e s a l e a nd r e t a i l p r i c e s advanced r a p i d l y i n 1979 and 1980. W h o lesale p r i c e s were t h e c o n s t a n t f o r 1981 and 1982, b e f o r e p a s s i n g on a l a r g e p r i c e i n c r e a s e fr o m b re w e r s i n 1983. c o n s t a n t o r f a l l i n g s i n c e 1981. R e t a i l p r i c e s have been R e ta il p ric e s ab so rb ed th e 1983 p r i c e in c re a s e . D o ck p r i c e s at th e b r e w e r i n c r e a s e d a t t h e same r a t e as th e n a t i o n a l P ro d u ce r P r i c e In d e x f o r b e e r d u r in g t h e t h r e e y e a r s b e f o r e and f i r s t y e a r a f t e r th e MBCDL. I n th e l a s t f o u r y e a r s th e y have i n c r e a s e d l e s s th a n th e n a t i o n a l in d e x i n s p i t e o f a m ajo r p r i c e i n c r e a s e i n 1983* 114 T h is p a tte rn o f s m a l l e r "b re w e r do ck p r i c e s h a s b e e n e x p e r i e n c e d th ro u g h o u t th e N o r th - C e n tr a l r e g i o n o f th e c o u n try a nd i s p r o b a b l y n o t re la te d t o t h e M i c h i g a n MBCDL. B re w e r dock p r i c e s f o r t h e v a r i o u s b ra n d s i n any p r i c e c l a s s w e re f o u n d t o v a r y , w i t h i n a s m a l l r a n g e . W h o l e s a l e p r i c e s f o r b e e r w e re i d e n t i c a l f o r a l l bran ds i n each p r i c e l i n e w ith few e x c e p t i o n s . R e t a i l s u p e r m a r k e t p r i c e s w e re w i t h i n two p e r c e n t o f each o t h e r f o r th e p r i c e o f premium b e e r and, w i t h i n a s t o r e , b ra n d s i n each p r i c e l i n e were s i m i l a r l y p r i c e d . The r e t a i l m a r g i n i n r e a l lo w er i n 1983 th a n i n 1976* ( d e f l a t e d d o l l a r ) term s was 30 p e r c e n t This means t h a t r e t a i l e r s h a d 30 p e r c e n t l e s s money t o c o v e r t h e a d d i t i o n a l b u r d e n s p l a c e d u p o n them by t h e MBCDL. The w h o le s a le m argin was u p 31 p e r c e n t i n r e a l t e r m s f o r t h e same p e r io d . An e s t i m a t e o f t h e am o un t o f money consumers p a id i n h i g h e r b e e r p r i c e s due t o t h e MBCDL was m ad e. B e tw e e n 54 a nd 74 m i l l i o n d o l l a r s w e re s p e n t d u rin g each o f t h e f i r s t t h r e e y e a r s due t o p r i c e s i n e x c e s s o f th o s e p r e d i c t e d by n a t i o n a l b e e r p r i c e change. and 3*8 c e n t s p e r c o n t a i n e r f o r t h e t h r e e y e a r s . T his was b e t w e e n 2 . 7 P r e d i c t e d p r i c e s based on n a t i o n a l t r e n d s (CPI) h ave re a c h e d a p p r o x i m a t e l y t h e same l e v e l a s a c t u a l Michigan su p e rm a rk e t b e e r p r i c e s d u rin g 1982 and 1983'. Extreme c a u t i o n m u st b e u s e d i n e x t r a p o l a t i n g t h e s e r e s u l t s o t h e r s t a t e s o r n a t i o n a l l y w ith o u t f u r t h e r v e r i f i c a t i o n . d e c l i n e i n th e r e t a i l p r i c e to The r e l a t i v e o f b e e r i n M i c h i g a n d u r i n g t h e l a s t two y e a r s h a s come fro m two d i s t i n c t s o u r c e s . One i s th e r e d u c t i o n i n t h e r e t a i l m argin which o c c u r r e d i n 1982 a t th e tim e b e e r p r i c e a d v e r t i s i n g w as a l l o w e d i n M ich ig an . The second i s t h e c o m p e titiv e s i t u a t i o n among l a r g e brew ers which h a s d e v e lo p e d i n t h e N o r t h - C e n t r a l r e g i o n o f t h e c o u n t r y s i n c e 1980. Brewer p r i c e i n c r e a s e s i n a l l o f t h e N o r t h - C e n t r a l S t a t e s have been below th e n a t i o n a l a v e ra g e i n c r e a s e s i n r e c e n t y e a r s . 115 ENDNOTES 1. M ic h ig a n B e v e r a g e C o n t a i n e r D e p o sit Law, M ichigan Compiled Laws, S e c t i o n 4 4 5 .5 7 1 - 4 4 5 .5 7 6 ( 1 9 7 6 ) . E f f e c t i v e d a t e D ecem ber 3» 1978. 2. M ic h i g a n C o m p ile d Law s. S e c t i o n 4 3 6 .3 3 1978. E f f e c t i v e d a t e , December 23, 1978. 3. The S t a t e o f M i c h i g a n , t h r o u g h i t s L i q u o r C o n t r o l Commission, c o l l e c t s $ 6 . 3 0 t a x from t h e brew er on ev ery b a r r e l o f b e e r s o l d i n t h e s t a t e a n d , t h e r e f o r e , i t k e e p s a c c u r a t e r e c o r d s on t h i s p r o d u c t. A b a r r e l o f b e e r i s e q u a l t o 31 g a l l o n s , o r 13*78 c a s e s o f 24-12 o z . p a c k a g e s. (1 9 7 8 ) , o r P u b li c A cts 4. M ic h i g a n C o m p ile d Law s. S e c t i o n 7 2 2 .5 1 -7 2 2 .5 5 (1971) o r P u b li c A c ts 1971. No. 79. E f f e c t i v e d a t e J a n u a r y 1, 1972. 5. H y b a rg er, D e n n is. M ic h i g a n L iq u o r C o n tro l Commission, H e arin g s and A ppeals S e c t i o n , L a n s in g , M ichigan, I n t e r v i e w , J a n u a r y 1979. 6. B in g h a m , T a y l o r , H . , e t . a l . , E n e rg y a n d E c o n o m ic I m p a c t s o f Mandatory D e p o s i t s . R esearch T r i a n g l e I n s t i t u t e , R ese arch T r i a n g l e P a r k , N o r t h C a r o l i n a , f o r t h e F e d e r a l E n e rg y A d m i n i s t r t i o n , S e p te m b e r, 1976. A v a i l a b l e a s NTIS, P B - 2 5 8 - 6 3 8 ; a n d G e n e r a l A c c o u n t i n g O f f i c e , S t a t e ’ s E x p e r i e n c e W ith B e v e r g e C o n t a i n e r D e p o s i t L aw s Shows P o s i t i v e B e n e f i t s , r e p o r t n o . PAD 8 1 - 0 8 , December 11, 1980, Appendix I I . 7. One s t u d y o f M ic h i g a n b e e r s a l e s , G e n e r a l A c c o u n t i n g O f f i c e , S t a t e ’ s E x p e r i e n c e W ith B e v e r a g e C o n t a i n e r D e p o s i t Laws Shows P o s i t i v e B e n e f i t s , u sed a te c h n iq u e c o rre c tin g fo r second-order s e r i a l c o r r e l a t i o n i n t h e i r model; A nother s tu d y on n a t i o n a l s a l e s d a t a , Bingham , Energy and Economic Im p a c ts o f M andatory D e p o s i t s , c o n v e r t e d t h e v a r i a b l e s i n t o lo g s b e f o r e m o d e lin g th e r e l a t i o n s h i p s . N e i t h e r form improved th e a c c u r a c y o f t h e m o d e ls i n th e p r e s e n t s tu d y . 8. The o r d i n a r y l e a s t s q u a r e s r e g r e s s i o n s o l u t i o n h ad D urbin-W atson t e s t s t a t i s t i c v a lu e s in d ic a tin g s ig n if ic a n t a u t o - c o r r e l a t i o n ( a t t h e .0 5 l e v e l ) o f t h e e r r o r te rm s. A r e g r e s s io n te ch n iq u e c o rre c tin g fo r f i r s t o rd er s e r i a l c o r r e la tio n o f th e e r r o r te rm s a c c o r d i n g t o B ea c h and M acK innon p r o v i d e d v e r y s a t i s f a c t o r y Durbin-W atson t e s t s t a t i s t i c s ( a v e r 2 ) . 9. G e n e r a l A c c o u n t i n g O f f i c e , S t a t e ’ s E x p e r i e n c e W ith B e v e r a g e C o n t a i n e r D e p o s i t Laws Shows P o s i t i v e B e n e f i t s , r e p o r t no. PAD 8 1 -0 8 , December 11, 1980, Appendix I I . 10. U . S . D e p a r t m e n t o f C om m erce, B u re a u o f t h e C e n s u s , C u r r e n t P o p u l a t i o n R e p o r t s , p - 2 5 , Numbers 130, 151 , 172, 194, 21 4, 384, 420, 437, 875 and 930. V a rio u s d a t e s . 116 11. S im m o n s M a r k e t 1 9 7 9 ," q u o t e d C o m p r e h e n siv e I n c . , New Y o r k , 12. B in g h a m , T a y lo r , H ., e t . M an d atory D e p o s i t s . 13. R e s e a r c h B u r e a u , " A m er ic a n B e e r D r i n k i n g H a b i t s in J e r r y S te in m a n , e d . , The B eer I n d u s tr y : A R e v iew and A n a l y s i s . B eer M a r k e te r 's In sig h ts, 1982. al., E n erg y and E c o n o m ic I m p a c ts o r W a g e n a a r , A l e x a n d e r , " A g g r e g a t e B e e r a n d Wine C o n s u m p tio n : E f f e c t s o f C h a n g e s i n t h e Minimum L e g a l D r i n k i n g Age a n d a M a n d a to ry B everage C o n ta in e r D e p o sit Law." J o u r n a l o f S t u d i e s on A l c o h o l . Vol. 4 3 , no. 5 (May 1982): 469-82. 14. A lcoh ol B everage S a l e s and t h e Legal D rin k in g Age. F o u n d a tio n , M adison, W isc o n s in , 1981. 15. U .S . D e p a r t m e n t o f L a b o r, Bureau o f Labor S t a t i s t i c s , Employment and E a r n i n g s . V a r i o u s d a t e s . And, M ichigan Employment S e c u r i t y Commission, M ic h ig a n 's Labor M ark et. Vol. 12, no. 1, 1957, P. 8 . 16. The Commonweal B r a n c h , B en , "T h e E co no m ic O u t l o o k f o r B e e r W h o l e s a l e r s . " Brew ers D i g e s t . J a n u a r y 1980: 32 , 3 3 , 42 . The • 17. D u r b i n , J . and W a ts o n , G . S . , " T e s t i n g f o r S e r i a l C o r r e l a t i o n i n L e a st S qu ares R e g r e s s io n . I I . " B io m e tr lc a 38 (1951) p. 159-78. 18. U .S . D e p a rtm e n t o f Commerce, O ffic e o f B u s in e s s Economics, Survey o f C u rre n t B u s in e s s . V a rio u s d a te s . The M ic h i g a n O f f i c e o f R evenu e and Tax A n a l y s i s e s t i m a t e d t h a t S t a t e and F e d e r a l t a x e s have a c c o u n te d f o r a f a i r l y s t a b l e s h a r e o f p e r s o n a l in c o m e o v e r t i m e e q u a l l i n g a b o u t 12 t o 14 p e r c e n t . D is p o s a b le income i s n e t o f t h e s e t a x e s b u t a l e s s c o n s i s t e n t l y co m p u te d f i g u r e o v e r t h e l a s t 30 y e a r s ( I n t e r v i e w ; F e b ru a ry 4 , 1 984). 19. S a l e s a n d M ark etin g Management, "Survey o f Buying Pow er," J u l y o f v a rio u s y e a rs. 20. Can M a n u f a c t u r e r s I n s t i t u t e , "CMI B eer and S o f t D rin k S e l f P r ic e S u r v e y ." J a n u a r y 1979 t o May 1980. (Mimeographed); M ichigan Food D e a l e r s A s s o c i a t i o n , " C o n t a i n e r Law S u r v e y . " F e b r u a r y , 1979. (Mimeographed); and S c h lo b o h m , S t a r r F . , " 1 9 8 2 B e v e r a g e P r i c e S t u d y : M a in e , New H am pshire, Vermont, M a s s a c h u s e t t s , " December, 1982. ( T y p e w r i tte n ) . 21. P r i c e s w e re c o l l e c t e d f o r t h e F l i n t , M ichigan m a rk e t. S j o l a n d e r , R i c h a r d , The E c o n o m ic E f f e c t s o f t h e M ichigan B everage C o n ta in e r Law o n a P a c k a g e S y s t e m . S p e c i a l R e p o r t 1 3 , M ic h i g a n S t a t e U n i v e r s i t y S c h o o l o f P a c k a g i n g , May, 1 9 7 9 . T h i s r e p o r t w as u p d a te d th ro u g h 1983. 22. U .S . D e p a r t m e n t o f L a b o r , B u re a u o f L a b o r S t a t i s t i c s , Consumer P r ic e In d e x . D e t a i l e d R e p o r t. V a rio u s d a t e s . 117 23. U . S . D e p a r t m e n t o f L a b o r , B u r e a u o f L a b o r S t a t i s t i c s , C onsum er P r i c e I n d e x , W orth C e n t r a l R e g i o n A r e a R e p o r t s . V a r io u s D a t e s . 24. U .S . B re w e rs A s s o c i a t i o n , I n c . , B re w e rs A lm anac: The Brewing I n d u s tr y in th e U n ite d S t a t e s . U . S . B re w e rs A s s o c i a t i o n , W ashington, D .C ., V a rio u s y e a r s . 25. Braun, S te v e , "B eer Smugglers t a p I n d i a n a ’ s P r i c e s . " P r e s s , J a n u a ry 10, 1984, s e c . B, p. 1. 26. M ichigan Compiled Laws, P u b l i c Act 235 o f 1980. 27. H y b a r g e r , D e n n is. M i c h i g a n B e e r a n d W in e W h o l e s a l e r s A s s o c i a t i o n t o M a r t in , R a n d y , M ic h ig a n L iq u o r C o n t r o l C o m m issio n , R e p o r t , J u n e 20, 1981. (T y p e w r itte n .) 28. I l l i n o i s lo w ered i t s l e g a l d r in k i n g age f o r b e e r and wine from 21 t o 19 i n Septem ber 1973 and p u t i t back up t o 21 i n J a n u a r y 1 9 8 0 . T h i s i s t h e only age change i n t h e 4 s t a t e r e g io n e x c e p t f o r Ohio e l i m i n a t i n g t h e 18 y e a r o ld 3*2 b e e r i n 1983* No o t h e r s t a t e i n t h e r e g io n h a s implem ented b e v erag e c o n t a i n e r d e p o s i t l e g i s l a t i o n . 29. M i c h i g a n ' s D e p o s i t Law? F i r s t Y e a r , An I n t e r i m R e p o r t o f th e S p e c i & l J o i n t C o m m itte e t o S tu d y t h e - I m p a c t o f t h e B e v e r a g e C o n ta in e r D e p o sit Law. December 4, 1979, p . 18. 30. No b e e r c o n t a i n e r s c o u l d b e s o l d a f t e r December 3 , 1978 w i t h o u t t h e mandated M ichigan Refund l a b e l b o th w h o le s a le r s and r e t a i l e r s w e re f o r c e d t o e m pty t h e i r i n v e n t o r i e s b e f o r e t h a t d a t e . As a consequence s a l e s t o w h o l e s a l e r s d u r in g O c to b e r w e re down 30/6 o r 1 7 0 .0 0 0 b a r r e l s a s compared w ith t h e same month i n 1977. Some o f t h i s was r e g a in e d d u r in g November and December b u t i t i s g e n e r a l l y a c c e p t e d t h a t t h e 3 0 $ o r 12 0,000 b a r r e l i n c r e a s e i n J a n u a r y 1979 o v e r J a n u a ry 1978 w as t o f i l l t h e p i p e l i n e . By F e b r u a r y 1979 s a l e s w e re down t o t h e l e v e l o f p r i o r y e a r and i n March 79 f e l l beh in d 1978 l e v e l s . No a d ju s tm e n t i s made f o r t h i s e f f e c t i n t h e d a t a b u t s a l e s i n 1978 a r e p ro b a b ly b ia s e d downward n th e f i g u r e s u s e d and 1979 r e t a i l s a l e s a r e b i a s e d up w a rd i n t h e r a n g e o f 120.000 b a r r e l s o r a b o u t 2 $ . 31. I n M i c h i g a n f o r e x a m p l e , t h e r e w e r e 5 2 1 ,0 0 0 18-20 y e a r o l d s i n 1972 a n d o n l y 5 5 4 ,0 0 0 o f t h e m i n 1979* 32. S jo la n d e r , The Economic E f f e c t s o f t h e M ichigan Beverage C o n ta in e r Law on a Package System , p. 4 8 . 33. W e in b e rg , R o b e r t a n d A s s o c i a t e s , "Working P a p e r: The Im pact o f S h i f t i n g fro m t h e P r e s e n t C o n v e n i e n c e P a c k a g i n g M a lt B e v e r a g e P r o d u c t i o n / D i s t r i b u t i o n System t o a R e tu rn a b le -O n ly system on t h e P r i c e th e Consumer w i l l u l t i m a t e l y have t o pay f o r M alt B e v e r a g e s f o r O f f - P r e m i s e C o n su m p tio n ." I n R e fe re n c e Source Book, C h a p te r 8 , U.S. Brewers A s s o c i a t i o n , W ashington, D.C. D e tro it F ree 118 34. M ic h i g a n D e p a r t m e n t o f Commerce, P u b l i c S e r v ic e Commission, An E co n o m ic A n a l y s i s o f E n e rg y a nd E m ploym ent E f f e c t s o f D e p o sit R e g u l a t i o n on N o n - R e t u r n a b l e B e v e r a g e C o n t a i n e r s i n M ichigan. MPSC S t a f f S t u d y 1 9 7 5 , O c t o b e r 3 , 1 9 7 5 ; a n d R o s s , M yron, "E m p lo y m e n t E f f e c t s o f a B an o n N o n - R e t u r n a b l e B e v e r a g e C o n t a i n e r s . " Kalamazoo N a tu re C e n te r f o r E n v iro n m e n tal E d u c a tio n , A p ril 1974. 35. L ynn J o n d a h l , M ic h i g a n H ouse o f R e p r e s e n t a t i v e s , L a n s in g , M ichigan. I n t e r v i e w , J a n u a r y , 1979. J o n d a h l in tr o d u c e d c o n t a i n e r l e g i s l a t i o n i n M ic h ig a n even b e f o r e t h e p r e s e n t , i n i t i v e law was p a ss e d i n 1976 i n a s t a t e - w i d e re fe re n d u m . 36. W e i n b e r g , R o b e r t , "M em o ran d u m o n T he O f f i c e o f T e c h n o lo g y A s s e s s m e n t R e p o r t : M a t e r i a l s and E n e rg y From W aste: R esource R e c o v e r y and R e c y c l i n g fr o m M u n i c i p a l S o l i d Waste and B everage C o n ta in e r D e p o sit L e g i s l a t i o n ." S t . L o u i s , R .S . W einberg and A s s o c i a t e s , August 8 , 1978, p. A5, t a b l e B . 37. F a l s t a f f B r e w e r y , R e g i o n a l M a r k e t i n g D e p a r t m e n t , F o r t Wayne, I n d i a n a . I n t e r v i e w , May 2 5 , 1979. 38. B eer W h o le s a le r , F l i n t , M ichigan. I n t e r v i e w , O cto b er 1982. 39. H u n t , R o b e r t G . , a n d W i l l i a m E. F r a n k l i n , R e s o u r c e a n d E n v i r o n m e n t a l A n a l y s i s o f N in e Beverage C o n ta in e r A l t e r n a t i v e s , p r e p a r e d f o r t h e U .S . E n v iro n m e n tal P r o t e c t i o n Agency by Midwest R ese arch I n s t i t u t e , EPA-350-SW-91C, 1974. 40. B i n g h a m , T a y l o r , H. , e t a l . Mandatory D e p o s i t s . 4 1. S c o t t , R o la n d a n d Z a n d i, I r a q . Energy and M a t e r i a l R equirem ents o f B e v e r a g e C o n t a i n e r S y s t e m s . Volumen I I , i n A S t u d y o f t h e i m p a c t s o n t h e USA o f a Ban o n One-Way B e v e r a g e C o n t a i n e r s , p r e p a r e d f o r t h e US B r e w e r s A s s o c i a t i o n by B u sc h C e n t e r , t h e Wharton S c h o o l , U n i v e r s i t y o f P e n n s y l v a n i a , P h i l a d e l p h i a , PA, December 1976. 42. B a t t e l l e Columbus D i v i s i o n , E v a lu a tio n o f Energy Consumed i n U sing R e f i l l a b l e G la s s B o t t l e s and Cans f o r B eer and S o f t D r in k s , r e p o r t t o Can M a n u f a c tu re rs I n s t i t u t e , June 1978. 43. B i d e r , W illia m L . , and R obert G. Hunt, C om parative Energy Im p a c ts A s s o c i a t e d w i t h t h e D e liv e r y o f B everage i n E ig h t S in g l e - S e r v i n g C o n t a i n e r s . p r e p a r e d f o r The Aluminum Company o f A m e ric a by F r a n k l i n A s s o c i a t e s , L t d . , 25 J a n u a r y , 1982. 44. C h a p i n , R o b e r t J . , "Aluminum Can M arket Perform ed W ell i n ' 8 3 , n speech r e p o r t e d i n Modern Brewery Age. F e b ru a ry 6 , 1984, p. 3. E n e r g y and E co n o m ic I m p a c t s o f 119 45. 46. M i c h i g a n D e p a r t m e n t o f C o m m e r c e , An E c o n o m i c A n a l y s i s o f E n e r g y and E m p lo y m e n t E f f e c t s o f D e p o s i t R e g u l a t i o n on N o n -R e tu r n a b le . B e v er a g e C o n ta in e r s i n M ic h ig a n . 1_____ T rip p a g e r a t e = 1 - r e u s e r a t e w h e re r e u s e m e an s t h a t a c o n t a i n e r w as r e t u r n e d t o a brew er i n u sab le c o n d itio n . 47. M i c h i g a n D e p a r t m e n t o f C o m m e r c e , An E c o n o m ic A n a l y s i s o f E nergy, and E m p lo y m en t E f f e c t s o f D e p o s i t R e g u l a t i o n on N o n -R e tu r n a b le B e v e r a g e C o n ta in e r s i n M ic h ig a n . 48. W einberg, R obert S . , "The E f f e c t s o f Convenience P ackaging on th e M alt B everage I n d u s t r y , 1947-1969" i n R eferen o e S ource B o o k , U .S . Brew ers A s s o c i a t i o n , W ashington, D .C . , pp. 6 -9 . 49. " M i l l i k e n o r d e r s probe i n t o b e e r p r i c e h i k e s , " The M ichigan S t a t e N ews. E a s t L a n s i n g , M i c h i g a n , 22 May 1979* P. A3, and " P r e s s R e l e a s e F e b r u a r y 4 , 1982" O f f i c e o f t h e A tto rn e y G e n e ra l, L ansing M ichigan. A tto r n e y G e n e r a l K e l l e y a n n o u n c e s t h a t t h e t w o - y e a r i n v e s t i g a t i o n f a i l e d to d e v elo p e v id e n c e o f a c rim in a l p r ic e f i x i n g c o n s p ir a c y . 50. C h a m b e r l a i n , E d w a rd , The T h e o r y o f M o n o p o l i s t i c C o m p e titio n ; a R e - o r i e n t a t i o n o f t h e Theory o f V a lu e . 7 th e d . Cambridge, H arvard U n i v e r s i t y P r e s s , 1956. 51. A l d e r s o n , W ro e, D ynamic M a r k e t i n g B e h a v i o r . A F u n c t i o n a l a l i s t T h e o r y o f M a r k e t i n g . Homewood, 1 1 1 .: R.D. I r w i n , 1965. S t i l l , many a n a l y s t s e i t h e r a c c e p t t h e c o m p e t i t i v e model o r r a i s e o n ly t h e q u e s t i o n o f w h e th e r p r i c e s a r e c o s t b a s e d . F o r e x a m p le s e e t h e o t h e r w i s e e x c e l l e n t s t u d y by P o r t e r . P o r t e r , R ic h ard C . , " M ic h ig a n 's E x p e r ie n c e w ith M an d ato ry D e p o s i t s o n B e v e r a g e C o n ta in e rs ." L a n d E c o n o m i c s . V o l . 59> No. 2 , (May 1 9 8 3 ) : 177-194. 52. D e p a r t m e n t o f Commerce, L iq u o r C o n tro l Commission, "The M ichigan L iq u o r C o n tr o l Act and R u l e s , " L a n s in g , M ichig an, 1977. P r e f a c e . 53. I b i d . , p a ra g ra p h 4 3 6 .3 . 54. I b i d . , p a ra g ra p h 436.31* 55. Oregon L iq u o r C o n tro l Commission, S p e c i a l I n v e s t i g a t i o n s D i v i s i o n , " P r i c e S u rv e y , F e b r u a r y , 1974"; Can M a n u f a c tu re rs I n s t i t u t e , "CMI B eer and S o f t D rin k S e l f P r i c e S u r v e y ." J a n u a ry 1979 t o May 1980. (Mimeographed); M ichigan Food D e a l e r s A s s o c i a t i o n , " C o n t a i n e r Law S u r v e y ." F e b r u a r y , 1979. (M im eographed); and Schlobohm, S t a r r F . , "1982 B everage P r i c e S t u d y : M a in , New H a m p s h ir e , V e rm o n t, M a s s a c h u s e t t s , " December 1982. ( T y p e w r i te n ) . 56. S j o l a n d e r , The Economic E f f e c t s o f t h e M ichigan B everage C o n ta in e r Law on a Package System. 120 57. W e i n b e r g , R o b e r t S . , "Memorandum on O ffic e (GAO) R e p o r t: S ta te E x p e rie n c e W ith B e v e ra g e C o n t a i n e r D e p o s i t Laws Shows P o s i t i v e B e n e f i t s (PAD-81 - 0 8 ) , " S t . L o u i s , R .S. W einberg and A s s o c i a t e s , March 6 , 1981, (m im eograph), 58. T h i s a s s u m p tio n h a s be en made by o t h e r a n a l y s t s , b u t no a tte m p t t o t e s t i t s v a l i d i t y i s know n. G e n e ra l A ooounting O f f i c e , S t a t e d E x p e r i e n c e w i t h B e v e r a g e C o n t a i n e r D e p o s i t Laws Shows P o slti-v e B e n e f i t s , p. 60; and P o r t e r , " M i c h ig a n 's E x p e rie n c e w i t h M andatory D e p o s its on B ev erage C o n t a i n e r s " , p. 187* 59. I n t e r m s o f t h e l o s s o f oonsumer s u r p l u s shown i n F i g u r e A, o n ly a r e a 1 i s in c lu d e d . P ro je c te d s a l e s f ig u r e s a r e i n c lu d e d i n th e m od el s e c t i o n so t h a t th e i n t e r e s t e d r e a d e r can oompute t h e s i z e o f a re a 2. P r ic e P -Q , = W ith MBCDL P,Q . = W ithout MBCDL DD = Demand Curve 60. Can p r i c e s w ere e q u a te d w ith b o t t l e p r i c e s a t t h e w h o l e s a l e l e v e l i n 1977. I t i s n o t known w h e th e r t h i s change i n p r i c i n g s t r a t e g y w as u n i q u e t o M i c h i g a n . B re w e r p r i c e s h a v e t r a d i t i o n a l l y been lo w e r f o r b o t t l e s t h a n o a n s. T h i s p o l i c y i s s t i l l e v i d e n t i n 1983 p r i c e s i n M ich igan . 61. " M i l l i k e n o r d e r s pro b e i n t o b e e r p r i c e h i k e s , " The M ichigan S t a t e Mews, E a s t L a n s i n g , M i c h i g a n , 22 May 1979? P> A3, and " P r e s s R e l e a s e F e b r u a r y 4 , 1982" O ffio e o f t h e A tto rn e y G e n e r a l, L a n s in g M ich ig an. A tto r n e y G e n e r a l K e l l e y a n n o u n o e s t h a t t h e t w o - y e a r i n v e s t i g a t i o n f a i l e d to d e v e lo p e v id e n c e o f a c r im in a l p r ic e f i x i n g c o n sp irac y . 62. O f f i o e o f T e c h n o lo g y A sse ssm e n t. M a t e r i a l s a nd E n e r g y fr o m M u n ic ip a l W aste. W ashin gto n D.C. J u l y , 1979. P P .268. 6 3. O f f i c e o f D e v e lo p m e n t P l a n n i n g , New Y o rk . M a n d a to r y D e p o s i t L e g i s l a t i o n : B e n e f i t s and C o s ts f o r New York. New York, March, 1982. (Mimeograph) CHAPTER IV Summary, C o n c lu s io n s , P o li c y Recommendations T h is r e s e a r c h p r o j e c t a n a ly s e d t h e e f f e c t o f a p u b l i c p o l i c y , th e M ic h i g a n M a n d a to r y B e v e r a g e C o n t a i n e r D e p o s i t Law (MBCDL) o n f i v e c h a r a c t e r i s t i c s o f th e m arket f o r b e v erag e s. in d u s try s a le s , ( 2 ) border a re a s a le s , sy ste m s e n erg y u s e , These w e re : ( 1) to ta l ( 3 ) package m ix, (4 ) d i s t r i b u t i o n and ( 5 ) p r o d u c t p r i c e s . The b e e r i n d u s t r y was s e l e c t e d f o r s tu d y b e c a u s e c o m preh ensive d a t a f o r s a l e s a nd c o n t a i n e r ty p e s w ere a v a i l a b l e from t h e M ichigan L iq u o r C o n tr o l Commission. Because o t h e r c h an g e s w ere t a k i n g p l a c e a t t h e tim e t h e MBCDL w as b e in g im p le m e n te d , s e v e r a l k ey v a r i a b l e s w ere e x p l i c i t l y a n a ly z e d t o s e p a r a t e t h e i r e f f e c t from t h a t o f t h e MBCDL. These i n c l u d e a n o th e r p u b l i c p o l i c y m easure ( r a i s i n g t h e l e g a l d r i n k i n g a g e ) , p l u s changes i n econom ic, p o p u l a t i o n , and p r i c e v a r i a b l e s . F iv e m ajo r f i n d i n g s can be a t t r i b u t e d t o t h e MBCDL. 1) The v o lu m e o f b e e r s o l d i n M ichigan dropped a f t e r t h e MBCDL. A d e c lin e o f b e tw e e n 3 4 5 ,0 0 0 b a r r e l s and 4 8 5 , 0 0 0 b a r r e l s p e r y e a r w as a t t r i b u t e d t o t h e MBCDL (T a b le s 4 and 6 ) . T h i s a m o u n ts t o b e t w e e n 5 a n d 7 p e r c e n t o f a n n u a l s a l e s , b a s e d on volum e. The number o f pack ag es s o l d d e c l i n e d ev en more t h a n t o t a l v o lu m e -1 7 p e r c e n t from 1978 t o 1982 (T a b le 1 0 ). 121 122 2) Packaged beer sa le s In c o u n tie s lo c a te d a lo n g M ic h ig a n 's s o u t h e r n b o r d e r d e c li n e d by a p p r o x i m a t e l y 9 p e r c e n t m ore t h a n p a c k a g e d s a l e s d e c l i n e d i n th e r e s t o f th e s t a t e d u r i n g th e y e a r s 1977-1980 (T a b le 8 ) . 3) T h e p a c k a g e m ix i n th e M ic h ig a n m a rk e t s h ifte d d r a m a t i c a l l y w ith i m p l e m e n t a t i o n o f t h e MBCDL. d ropped from C ans a b o u t 70 p e r c e n t o f t h e m a r k e t t o 39 p e r c e n t t h e f i r s t y e a r , b u t i n c r e a s e d t o 47 p e r c e n t by 1982. The 1 9 > t r i p r e f i l l a b l e b o t t l e i n i t i a l l y went from 10 t o 30 p e r c e n t m arket s h a r e , b u t h a s now s l i p p e d t o 20 p e r c e n t . N o n - r e f i l l a b l e b o t t l e s have rem ained r e m a rk a b ly s t e a d y a t a r o u n d 20 p e r c e n t o f t h e m a r k e t and a new, 4 - t r i p b o t t l e has c a p tu r e d ab o u t 12 p e r c e n t o f t h e m ark et (F ig u r e 16 and T a b le 1 0 ). 4) The r a t e of energy c o n su m p tio n i n th e t o t a l beer d e l i v e r y sy ste m d ro p p e d by 38 p e r c e n t a s a r e s u l t o f t h e MBCDL and t h e r e s u l t i n g package mix ( F ig u r e 1 7 ). 5) The p r i c e t o consum ers o f t h e MBCDL was e s t i m a t e d a t 3 c e n t s p e r c o n t a i n e r f o r b o t t l e s and 4 . 5 c e n t s f o r c a n s d u r i n g t h e f i r s t t h r e e y e a r s a f t e r im p le m e n ta tio n . In t h e l a s t two y e a r s n a t i o n a l a v e r a g e p r i c e l e v e l s h a v e a l m o s t c a u g h t up w ith M ichigan s u p e rm a rk e t b e e r p r i c e s ( T a b le s 13 and 14, F i g u r e s 18 t h r o u g h 23 and A p p e n d ix V). 123 Two f i n d i n g s were r e l a t e d t o th e change 1) i n th e l e g a l d r i n k i n g age. L o w e r in g t h e minimum d r i n k i n g in 1972 c a u s e d b e e r s a l e s c o u n t i e s o f M ichigan t o r i s e age from 21 t o 18 y e a r s in th e s o u th e rn b o rd er by 7 p e r c e n t more th a n th e r e s t o f t h e s t a t e (T a b le 9)« «r 2) R a i s i n g t h e minimum d r i n k i n g age from 18 t o 21 y e a r s o f age in 19 78 w a s e s t i m a t e d to have red u ced beer c o n s u m p t i o n t h r o u g h o u t M ichigan by betw een 5 0 ,0 0 0 and 9 5 ,0 0 0 b a r r e l s p e r y e a r ( o r a b o u t 1 p e r c e n t o f t o t a l s a l e s — T a b le 8 ) . Some p o t e n t i a l e f f e c t s o f t h e MBCDL n o t a n a ly z e d a r e i t s im p act on l i t t e r , s o l i d w a s te , em ploym ent, b e v e r a g e s y s t e m c o s t s , and th e s o f t d rin k in d u s try . gp.nsl Asians The M ic h i g a n MBCDL h a d a c l e a r l y n e g a t i v e e f f e c t on th e demand fo r beer. Demand models d e v elo p e d f o r M ichigan e s t i m a t e d t h a t e f f e c t a t b e tw e e n 3 4 5 ,0 0 0 a nd 4 8 5 , 0 0 0 b a r r e l s f o r each o f t h e f i v e y e a r s . e s t i m a t e h e ld f o r demand T h is m o d e ls b a s e d on v a r i a b l e s w i t h i n M ichigan and f o r models where M ichigan s a l e s w ere compared w ith o t h e r s t a t e s i n t h e N o r t h - C e n t r a l Census R egion. a b in a ry v a r ia b le . The e f f e c t o f t h e MBCDL was modeled u s in g T h is meant t h a t t h e n u m e ro u s c o n t r i b u t i n g f a c t o r s s u c h a s p e r c e i v e d consum er in c o n v e n ie n c e i n r e t u r n i n g c o n t a i n e r s , l a c k 124 o f d e s i r e d p r o d u c t - p a c k a g e a s s o r t m e n t i n r e t a i l s t o r e s , and chan gin g consumer h a b i t s were a g g r e g a te d i n t o one v a r i a b l e (a lo n g w ith a l l o t h e r changes i n t h e en viron m en t o c c u r r i n g a t ab o u t t h e same t i m e ) . A h i g h l y s i g n i f i c a n t b o r d e r e f f e c t was found a lo n g t h e s t a t e ' s s o u th e rn b o rd e r. A 9 p e r c e n t d e c l i n e i n s a l e s r e m a in e d i n b o r d e r c o u n t i e s a f t e r a d j u s t i n g f o r b o th th e g e n e r a l s t a t e w i d e d e c l i n e and th e e s tim a te d e f f e c t o f r a i s i n g th e l e g a l minimum d r in k i n g age i n M i c h i g a n . The d i s l o c a t i o n o f s a l e s acro ss th e b o r d e r was s i m i l a r i n r e l a t i v e term s i n b o th u rb a n and r u r a l c o u n t i e s . A s p e c ia l a d ju stm e n t f o r th e change i n th e minimum l e g a l d r i n k i n g age was r e q u i r e d to a c c o u n t f o r th e o u t - o f - s t a t e 18 t o 20 y e a r o l d s who h a d c r e a t e d a p o s itiv e b o rd er e f f e c t i n t h e s e same c o u n t i e s d u r in g t h e y e a r s 1972 th ro u g h 1978 when th e y could c r o s s th e b o r d e r i n t o M ichigan and p u rc h a se b e e r l e g a l l y . The th e o ry u n d e r l y i n g even th e most r e c e n t government a n a l y s i s o f MBCDL p o l i c i e s , ba se d on t h e s t a t e s ' e x p e r ie n c e , i n c l u d i n g M ich ig an , p r e d i c t e d t h a t demand would rem ain c o n s t a n t f o r one y e a r and th e n resume the p r e v io u s ly e s t a b l i s h e d g r o w th t r e n d . T his a ss u m p tio n r e q u i r e s c a r e f u l r e e x a m in a tio n based on t h e r e s u l t s o f th e p r e s e n t s tu d y . D raught MBCDL. beer s a le s in c re a se d s ig n if ic a n tly There was a s u b s t i t u t i o n a s a r e s u l t o f th e o f d rau gh t b e e r f o r packaged b e e r, e s p e c i a l l y in th e o n -p re m ise m a rk e t. A lth o u g h o n -p r e m is e s a l e s a r e exempt from r e q u i r i n g c o n t a i n e r d e p o s i t s fro m c o n s u m e r s , t h e y a r e n o t exem pt fro m p a y in g d e p o sits to w h o le s a le rs f o r t h e i r p u rc h a s e s . C on seq uently, t h e s e c o n t a i n e r s m u st a l s o be c o l l e c t e d a n d s t o r e d by re ta ile rs f o r r e t u r n o f t h e d e p o s i t s from w h o l e s a l e r s . The r e t r i e v a l and e s p e c i a l l y s t o r a g e o f em pty c o n t a i n e r s i s m in im iz e d w i t h d r a u g h t b a rre ls. Some s u b s t i t u t i o n o f d r a u g h t f o r p a c k a g e d b e e r h a s a l s o o c c u r re d i n th e o f f - p r e m i s e m a rk e t. 125 A ll o f t h e d e c l i n e i n b e e r s a l e s f o l l o w i n g t h e M ichigan MBCDL cane from packaged b e e r s a l e s , more s p e c i f i c a l l y , s a l e s a cc o u n te d f o r th e t o t a l d e c l i n e . away from c a n s i n t h e m a rk e t. th e d e c lin e in can There was an im m ediate s h i f t P a r t o f t h i s s h i f t i s a t t r i b u t e d t o w hat can be c a l l e d a " v o l u n t a r y s h i f t " i n consumer demand. T h is i n c l u d e s t h e s h i f t t o b o t t l e s by consumers who th o u g h t t h a t c a n s w e re b a n n e d , by t h e MBCDL, and o t h e r s who sw itc h e d t o b o t t l e s a s th e y p e r c e iv e d t h i s t o be th e s p i r i t o f t h e la w ; c a lle d i.e . a " b o ttle b i l l ." S t i l l o t h e r s c o u l d be " i n v o l u n t a r y a d a p t e r s , " who sw itc h e d t h e i r p u r c h a s e s e i t h e r to b o t t l e s o r away from b e e r when th e y found b e e r i n c a n s , in s ix -p a c k s o f c a n s , a nd e s p e c i a l l y no l o n g e r s t o c k e d on t h e i r r e t a i l e r ' s s h e l v e s . Given t h a t t h e m arket s h a r e o f packaged b e e r i n can s was o v e r 70 p e r c e n t p r i o r t o t h e MBCDL, a nd t h a t a l m o s t a l l r e f i l l a b l e b o t t l e s a l e s were so ld i n th e o n -p re m is e m a rk e t, o ff-p re m ise s a le s . cans e a s ily c o m p r i s e d 80 p e r c e n t o f The t o t a l d is a p p e a r a n c e o f c a n s from r e t a i l s t o r e s was n o t an i s o l a t e d o c c u r r e n c e when t h e law to o k e f f e c t . S ev eral o f th e l a r g e s u p e r m a r k e t c h a i n s removed c a n s , w h ile o t h e r c h a i n s chose ch o se a l e s s r a d i c a l a p p ro a ch o f e l i m i n a t i n g s i x - p a c k s , b u t c o n t i n u i n g t o s t o c k a l i m i t e d a s s o r t m e n t o f 1 2 - p a c k p a c k a g e s o f c a n s w h ic h t h e y p la c e d i n c o n v e n i e n t l y on a h i g h s h e l f t o m inim ize s a l e s . Convenience s t o r e s c o n t i n u e d t o s t o c k t h e i r p r e - la w package mix. E ven t h i s may h a v e i m p a c t e d o n c o n s u m e r a t t i t u d e s to w a rd cans. C o n su m e rs f o u n d t h a t when r e t u r n i n g t h e i r empty c a n s f o r re fu n d many s t o r e s , th o s e d i s c o n t i n u i n g can s a l e s , would n o t r e f u n d can s o f even th e m o st w i d e l y s o l d b r a n d s , w h ic h th e y s o ld i n b o t t l e s . A f t e r about one y e a r r e t a i l e r a t t i t u d e s tow ard a c c e p t i n g r e t u r n s changed to w a rd v i e w i n g them a s a c u s t o m e r s e r v i c e i n s t e a d o f a n u is a n c e and a d d i t i o n a l c o s t . 126 Seeking c o m p e t itiv e a d v a n ta g e , some r e t a i l e r s began a c c e p t i n g f o r r e f u n d a n y c o n t a i n e r , r e g a r d l e s s o f w h e th er th e y s o ld t h a t ty p e o f package or even t h a t b ra n d . Many r e t a i l e r s th e n began t o s e l l t h e p r o d u c t i n c a n s a s w e l l a s r e f u n d i n g t h e empty c o n t a i n e r s . Cans have r e g a in e d a p o r t i o n o f t h e i r m arket s h a r e and a r e now w id e ly s o l d and r e f u n d e d . One t r u l y u n e x p e c te d f i n d i n g c o n c e rn in g t h e M ichigan package mix was t h a t r e f i l l a b l e b o t t l e s d i d n o t c a p t u r e a l a r g e r m arket s h a r e . d id They i n c r e a s e fr o m 10 ^ o 30 p e r c e n t o f t h e m a r k e t i n 1979* b u t t h e n o n - r e f i l l a b l e b o t t l e h ad an a lm o st e q u a l s h a r e . and 10 c e n t d e p o s i t d o e s n o t a p p e a r e f f e c t i v e The two t i e r e d 5 cent i n d i r e c t i n g consumer c h o ic e to w a rd th e p u rc h a se o f " g e n e r i c " r e f i l l a b l e b o t t l e s . I n 1982 th e 1 9 - t r i p r e f i l l a b l e had o n l y a 19 p e r c e n t m a rk e t s h a r e . Much o f t h e r e s e a r c h i n t o t h e e f f e c t s o f MBCDL p o l i c y h a s assumed t h a t th e n o n - r e f i l l a b l e b o t t l e w i l l d i s a p p e a r from t h e m a r k e t p l a c e a s a r e s u l t o f th e l e g i s l a t i o n . the c u rre n t re se a rc h . T h a t a ss u m p tio n i s c l e a r l y n o t s u p p o rte d by The n o n - r e f i l l a b l e b o t t l e m arket s h a r e i n c r e a s e d f o l l o w i n g t h e M i c h i g a n MBCDL. F i v e y e a r s l a t e r i t w a s b a c k t o t h e pre-MBCDL l e v e l . b o ttle The r e c e n t i n t r o d u c t i o n o f t h e 4 - t r i p r e f i l l a b l e h a s c a p t u r e d m a r k e t s h a r e from b o th t h e n o n - r e f i l l a b l e and t h e 1 9-t r i p r e f i l l a b l e b o t t l e s . B ee r i s a h ig h ly d if f e r i e n t i a t e d p ro d u c t. t h i s p r o d u c t p r i m a r i l y a c c o r d in g t o b ran d p r e f e r e n c e . between p u rc h a s in g b o t t l e s and c a n s . Consumers p u rc h a se They a l s o c h o o s e Only one ty p e o f b o t t l e i s o f f e r e d i n a r e t a i l o u t l e t f o r e a c h b ra n d w ith v e ry few e x c e p t i o n s . The c h o i c e among t h e v a r i o u s b o t t l e o p t i o n s , 1 9 - t r i p , 4 - t r i p and n o n - r e f i l l a b l e , i s made by t h e m a n u f a c tu r e r , n o t t h e consumer. The i m p o s i t i o n o f a 5 o r 10 c e n t d e p o s i t r e q u ire m e n t d o e s n o t a p p e a r t o be th e m ajor d e te r m in a n t i n 127 t h e c h o ic e o f b o t t l e t y p e by t h e b r e w e r . The s w i t c h i n M i c h i g a n by A n h e u s e r - B u s c h fro m a 5 c e n t 1 9 - t r i p r e f i l l a b l e t o a 10 c e n t 4 - t r i p r e f i l l a b l e and by S c h l i t z from a 5 c e n t 1 9 - t r i p r e f i l l a b l e t o a 1 0 c e n t n o n - r e f illa b le i l l u s t r a t e t h i s p o in t. Energy consum ption i n t h e b e v e r a g e d e l i v e r y system .was e x p e c te d t o d e c l i n e un der t h e MBCDL, a nd i t d i d . The d e c l i n e w a s r e l a t i v e l y i n s e n s i t i v e t o t h e a ss u m e d r e t u r n r a t e w i t h i n t h e r a n g e c o n s i d e r e d r e l e v a n t t o M ich ig an , 90 t o 96 p e r c e n t . l e a s t energy in te n s iv e c o n ta in e r. The 1 9 - t r i p r e f i l l a b l e was t h e H o w ev er, when t h e p a c k a g e s w ere a g g r e g a te d i n t o j u s t two c a t a g o r i e s , b o t t l e s and c a n s , c an s p ro v e d t o be l e s s energy in te n s iv e th a n b o t t l e s . T h is was b e ca u se b o th th e 4 - t r i p r e f i l l a b l e and n o n - r e f i l l a b l e b o t t l e s consume more s y s t e m s e n e r g y t h a n alu m in u m c a n s , when m ost o f t h e c a n s a r e r e c y c l e d . Most o f t h e energy s a v i n g s i s i n n o n -p e tro le u m b ased f u e l s a n d m o s t s a v i n g s a r e r e a l i z e d o u t s i d e o f M ichigan. C u rre n t MBCDL t h e o r y co u ld e x p l a i n t h a t consum er beer p ric e s r o s e , rem ain ed c o n s t a n t o r d e c l i n e d r e l a t i v e t o n a t i o n a l p r i c e l e v e l s a f t e r im p le m e n ta tio n o f th e la w . H ow ev er, i n M ichigan i n c r e a s e d r a p i d l y and t h e n , a f t e r s e v e r a l y e a r s , l e v e l s c a u g h t up t o a c t u a l a n a ly sis. f o r b oth b o t t l e s and c a n s . p ric e p re d ic te d T h i s r e q u i r e s c lo s e th e tr e n d i s c le a r Brewer p r i c e s i n M ichigan have n o t i n c r e a s e d a s f a s t as th e n a t i o n a l a v e r a g e . th e b rew er h a s , n a tio n a lly superm arket p r ic e s . S t a r t i n g from th e b a s e , o r F .O .B . p ric e s f i r s t With b o t t l 'e s i t c o u l d b e a r g u e d t h a t i n f a c t , r e a l i z e d package c o s t s a v in g s w hich a r e b e in g p a ss e d on i n t h e sy ste m . T h i s i s a weak e x p l a n a t i o n a s M i l l e r ( in c lu d e d a s one o f two b re w e r s i n t h e p r i c e s u rv e y ) d i d n o t s w itc h t o r e f i l l a b l e b o t t l e s f o r th e o f f - p r e m i s e m a r k e t i n M i c h i g a n , w h ic h i s a re q u ire d 128 c o n d i t i o n f o r th e package c o s t s a v in g s h y p o t h e s i s t o h o l d . T here i s no c o s t s a v in g s e x p l a n a t i o n f o r can p r i c e s and th e p r i c e d e c l i n e f o r c a n s was e v e n g r e a t e r t h a n f o r b o t t l e s . A number o f i n d u s t r y a n a l y s t s have p o i n t e d t o i n t e n s e c o m p e t itio n among n a t i o n a l b re w e rs o f premium b e e r i n t h e m id w e st. As th e "baby boom" p o r t i o n o f t h e p o p u l a t i o n m a tu re d , th e d r i n k i n g p o p u la tio n q u i t grow ing and t h e n a t u r e o f c o m p e t i t i o n c h a n g e d from i n c r e a s i n g t h e t o t a l m arket t o i n c r e a s i n g i n d i v i d u a l m ark et s h a r e s . A q u i s i t i o n s i n t e n s i f i e d c o m p e t itio n i n t h i s r e g i o n o f t h e c o u n t r y . The i n c r e a s e i n b re w er p r i c e s s in c e 1980 h a s been below t h e n a t i o n a l a v e ra g e th ro u g h o u t th e N o r t h - C e n t r a l R egion. At t h e w h o le s a le and r e t a i l l e v e l s i n th e d i s t r i b u t i o n system t h e r e l a t i v e p r i c e in d e x r a t i o s , showing t h e r e l a t i v e change in o p e r a tin g m a r g i n s o v e r t i m e , r e f l e c t r e a l c h a n g e s i n th e r e v e n u e s - l e s s - c o s t o f goods s o ld . The r e l a t i v e w h o l e s a l e p r i c e i n d e x r a t i o f o r b e e r b o ttle s in c re a se d s h a rp ly in h i g h e r l e v e l s i n c e th e n . rise in 1979 a nd 1980 and h a s re m a in ed a t t h a t T h i s s u p p o r t s t h e t h e o r y t h a t p r i c e s w o u ld a s w h o l e s a l e r s e x p e r i e n c e d i n c r e a s e d h a n d l i n g and d i s t r i b u t i o n c o s t s f o r an a l l r e t u r n a b l e s y s t e m . A s w i t c h t o m ore b o t t l e s i n t h e package mix r e q u i r e s a d d i t i o n a l t r a n s p o r t equipm ent and s t o r a g e sp ac e as b o t t l e p a ckages a r e l a r g e r and h e a v i e r t h a n c a n s . The s c r a p v a l u e o f g l a s s c u l l e t a m o u n ts t o a b o u t one h a l f c e n t p e r b o t t l e and i s r o u g h ly h a l f t h e v a lu e o f c a n s . The r e l a t i v e w h o l e s a l e p r i c e i n d e x r a t i o b e e r i n c an s d e v elo p e d s i m i l a r l y to th a t fo r b o ttle s . fo r The a d d i t i o n a l c o s t s f o r t h e v i r t u a l l y a l l aluminum c a n r e t u r n s a r e s u r e l y b e i n g m et t h r o u g h t h e s a l e o f s c r a p alum inum and r e t e n t i o n o f any u nclaim ed can d e p o sits. I t appears t h a t can p r i c e s e x h i b i t w hat i s c a lle d " stic k y p r i c e s on t h e dow nside" common t o s i t u a t i o n s w ith few c o m p e t ito r s on th e 129 s u p p ly s i d e ( u s u a l l y t h r e e t o f i v e w h o l e s a l e r s i n a n y m a r k e t a r e a ) and many p u r c h a s e r s on th e demand s i d e . R eta il m a rg in s i n c r e a s e d i n i t i a l l y , b u t have r e g r e s s e d d u r in g t h e p a s t two y e a r s b a c k t o pre-MBCDL l e v e l s i n s u p e r m a r k e t s . T here i s a d e q u a t e d o c u m e n t a t i o n o f a d d i t i o n a l c o s t s f o r r e t a i l e r s i n h a n d lin g m andatory r e t u r n s t o c o n clud e t h a t e i t h e r t h e c u r r e n t r e t a i l m a r g i n i s n o t c o v e r i n g c o s t s o r t h a t th e i n i t i a l a s s u m p tio n o f a m a tu re b e v erag e i n d u s t r y i n y e a r s p r i o r t o t h e M i c h i g a n MBCDL w a s i n v a l i d . s u p e r m a r k e t s a r e c o n s i d e r e d t o be v e r y c o m p e t i t i v e . R e ta il Most s t a t e s h a v in g a MBCDL compensate r e t a i l e r s a t l e a s t 1 c e n t p e r c o n t a i n e r a s a h a n d lin g fe e , a n d some s t u d i e s h a v e p l a c e d t h e c o s t t o r e t a i l e r s a t n e a r l y two c e n ts per c o n ta in e r. To t h e e x t e n t s u f f i c i e n t to m eet r e t a i l th a t a c tu a l m a rg in -s a r e not c o s t s i n c l u d i n g t h e c o s t s a s s o c i a t e d w ith c o n t a i n e r r e t u r n s , b e e r s a l e s m ust be c o n s id e r e d a l o s s i t e m s u p p o r t e d by th e s a l e o f o t h e r p r o d u c t s . There a r e p e c u l i a r i t i e s i n th e p r i c i n g o f b e e r i n M ichigan. T h is makes th e M ichigan e x p e r ie n c e o f l i m i t e d u s e i n p r e d i c t i n g t h e e f f e c t o f a MBCDL on b e v e r a g e p r i c e s i n o t h e r s t a t e s o r n a t i o n a l l y . U n til th e seeming an o m o lies a r e e i t h e r e x p l a i n e d o r v e r i f i e d i n o t h e r d e p o s i t s t a t e s , g e n e r a l c o n c l u s i o n s s h o u ld n o t be drawn. I t was n e c e s s a r y t o m o d e l t h e e f f e c t on b e e r s a l e s o f ch an g in g t h e l e g a l minimum d r i n k i n g age i n M ichigan t o i s o l a t e i t from t h e e f f e c t d u e t o t h e MBCDL. and 21 had C h a n g in g t h e minimum l e g a l d r i n k i n g age betw een 18 re la tiv e ly little e f f e c t on t h e t r e n d i n a g g r e g a t e b e e r s a l e s . T h is was n o t th e e x p e c te d r e s u l t . p a ra lle l case. However, I l l i n o i s p ro v id e s a The minimum l e g a l d r i n k i n g age was r a i s e d i n I l l i n o i s f r o m 19 t o 21 a y e a r a f t e r M i c h i g a n a n d y e t Illin o is beer s a le s 130 c o n t i n u e d t o i n c r e a s e f o r t h e n e x t two y e a r s . o b ta in e d i n M ichigan may be c o r r e c t . l e g a l d r i n k i n g age i s T h e r e f o r e , th e r e s u l t s E i t h e r th e e f f e c t o f c h a n g i n g t h e s m a l l , o r th e e f f e c t may be g r a d u a l which would n o t be c o r r e c t l y modeled u s in g a b in a r y v a r i a b l e . L im ita tio n s The la rg e st c o n s id e r e d . lim ita tio n o f th e stu d y i s t h a t o n l y b e e r w as The s o f t d r i n k i n d u s t r y h a s a s l a r g e a volume a s t h e b e e r . U n f o r t u n a t e l y t h e d a t a a r e n o t a v a i l a b l e t o co n du ct a d e t a i l e d s tu d y . To s i m p l y a d v i s e t h e r e a d e r t o m u l t i p l y a l l e f f e c t s by tw o i s an u n s a t i s f a c t o r y answ er to th e q u e stio n o f t o t a l e f f e c t s o f th e p o lic y . Y et, no b e t t e r answ er c a n be d e r iv e d from t h e p r e s e n t s tu d y . T h ere sc ie n c e s. a r e n u m e ro u s problem s i n v o lv e d w ith r e s e a r c h i n t h e s o c i a l I t i s never p o s s ib le to c o n t r o l th e u n iv e r s e so t h a t j u s t t h o s e v a r i a b l e s u n d e r s tu d y a r e a llo w ed t o assume n o n - c o n s ta n t v a l u e s . At th e same tim e as th e M ic h ig a n MBCDL t o o k e f f e c t t h e minimum l e g a l d r i n k i n g a g e w as r a i s e d from 18 t o 2 1 . The p r e s e n t s tu d y d e r iv e d b e s t e s t i m a t e s f o r t h e e f f e c t o f b o th p o l i c i e s o n b e e r s a l e s . th e b in a ry I m p lic it in v a r i a b l e m o d e lin g th e e f f e c t o f th e age change i s th e a ssu m ption t h a t t h e e f f e c t o f t h e p o l i c y on s a l e s w i l l be e q u a l and o p p o site w hen t h e ag e w as lo w e re d and th e n r a is e d a g a in . T h is assu m p tio n c o u ld n o t be checked u s in g t h e M ichigan d a t a . The e'conomy i n M ichigan i s more v o l a t i l e theui i n many r e g i o n s o f th e c o u n tr y . C ars d id n o t se ll i m p l e m e n t a t i o n o f t h e MBCDL. p e r s o n a l income l e v e l s , w e ll d u rin g th e y e a rs fo llo w in g A lthough th o s e two t h i n g s a r e u n r e l a t e d , u n e m p lo y m e n t, a n d c o n su m e r e x p e c t a t i o n s a r e a f f e c t e d by t h e s t a t e o f t h e a u to m o b ile i n d u s t r y and t h e s e f a c t o r s may a f f e c t b e e r s a l e s i n ways o t h e r th a n th o s e modeled. 131 The p r i c e th e consumer has p a id f o r b e e r u n d e r th e M ichigan MBCDL may r e f l e c t a number o f c o n d i t i o n s unique t o M ichigan and t h e f a c t t h a t i t was t h e f i r s t i n d u s t r i a l s t a t e w ith a l a r g e p o p u l a t i o n t o adopt such a p o lic y . to Brewer dock p r i c e s may have b e en r e s t r a i n e d i n M ic h i g a n due sp e c ia l c o m p e titiv e e x c lu siv e t e r r i t o r i e s d e sc rip tio n m oves i n t h e m id w e st. W h o le s a le r s , w ith and l i m i t e d n u m b e rs o f c o m p e t i t o r s of o lig o p o lis ts . P ric e fit th e th e o ry under o lig o p o lis tic c o n d i t i o n s p r e d i c t s t h a t p r i c e s w i l l be slow t o re s p o n d t o p r e s s u r e s t o reduce p r ic e , and t h e l a c k o f knowledge about a d d i t i o n a l c o s t s imposed by th e MBCDL may have pushed p r i c e s h ig h e r th a n a t l e a s t c o n s u m e r s a n d t h e o t h e r c h a n n e l m em bers w o u ld h a v e c o n s i d e r e d j u s t i f i e d . R etail m a rg in s have been so s m a ll d u r i n g t h e l a s t two y e a r s t h a t t h e r e i s a stro n g p r o b a b ility t h a t s u p e r m a r k e t r e t a i l e r s a r e n o t m e e tin g t h e i r t o t a l c o s t s on b e e r . The i n c l u s i o n o f r e t a i l p r i c e s from o t h e r ty p e s o f s t o r e s w o u ld h a v e made t h e r e t a i l p r i c e d a t a m ore r e p r e s e n t a t i v e o f M ichigan b e e r p r i c e s . P o lic y Recommendations F o r M ic h i g a n a l l t h a t c a n b e r e a l i s t i c a l l y a d ju s t m e n ts t o th e e x i s t i n g law . s u g g e s t e d a r e minor The l e g i s l a t i o n h a s a b r o a d b a s e o f p o p u l a r s u p p o r t w hich p r e c l u d e s t h e c o n s i d e r a t i o n o f a l t e r n a t i v e p o l i c y m e asu re s. P eo p le f e e l t h a t t h e y a r e d o i n g s o m e t h i n g t o im p r o v e t h e e n v iro n m e n t. There i s t h e a d d i t i o n a l p r o b le m i n M ichigan o f r e q u i r i n g more t h a n a s im p le m a j o r i t y v o te t o amend t h i s law b e ca u se i t was pa sse d by a re fe re n d u m v o t e . The c o n t a i n e r w h ic h a p p e a r s t o h a v e t h e g r e a t e s t im p a c t on th e e n v iro n m e n t, g iv e n t h e h ig h r e t u r n r a t e s , i s th e n o n - r e f i l l a b l e b o t t l e . 132 The c u r r e n t t w o - t i e r s y s t e m o f d e p o s i t s i s demand s i g n i f i c a n t l y . c le a r ly n o t in flu e n c in g The d i f f e r e n c e i n re fu n d v a l u e s h o u l d e i t h e r he in c re a s e d u n t i l th e d e s ire d e f f e c t on c o n t a i n e r u s e i s a c h ie v e d , o r a u n ifo rm d e p o s i t a t t h e l o w e r l e v e l s h o u l d h e e f f e c t e d . T h e r e i s no e v id e n c e o f h i g h e r r e t u r n r a t e s f o r c o n t a i n e r s h e a r i n g t h e h i g h e r re fu n d v a lu e . A d o p tin g a s i n g l e a p p ro x im a te ly d e p o sits. 5 cent d e p o sit l e v e l w o u ld tra n sfe r $ 1 0 m i l l i o n h a c k t o c o n s u m e rs i n t h e fo rm o f l o w e r That i s , th e t o t a l amount o f money on d e p o s i t on a n a v e r a g e day i n M ichigan would he $10 m i l l i o n l e s s i f a l l d e p o s i t s were 5 c e n t s . The h a n d l i n g f e e p a i d h y w h o l e s a l e r s to re ta ile rs on a p e r c o n t a i n e r h a s i s i n most MBCDL s t a t e s would somewhat e q u a li z e t h e im pact o f th e law on r e t a i l e r s . Those who r e c e i v e r e l a t i v e l y m ore c o n t a i n e r s h a c k f o r r e f u n d a r e a t a d is a d v a n ta g e to th o s e r e c e i v i n g fe w er r e f u n d s u n d e r th e c u r r e n t sy ste m i n M ich ig an . C e r ta i n ty p e s o f r e t a i l o u t l e t s , s u c h a s s u p e r m a r k e t s and some con v en ie n c e s t o r e s r e g u l a r l y r e c e i v e f a r g r e a t e r r e t u r n s th a n o t h e r s , such a s dru g s t o r e s , d i s c o u n t s t o r e s , h ars. To t h e e x te n t th a t th e se ty p e s of sto re s and a re in d ir e c t c o m p e t i t i o n w i t h e a c h o t h e r t h e law may d i s c r i m i n a t e a g a i n s t t h o s e s t o r e s which c o n t r i b u t e most to w ards i t s e f f e c t i v e n e s s . The recommendation f o r l o c a l and c o u n t y g o v e r n m e n ts i s re a liz e t h a t th e y t h a t th e b o r d e r e f f e c t s on b o th s a l e s p r o j e c t i o n s and p r o v i d i n g t h e d e s i r e d e f f e c t w i l l he much g r e a t e r i n a s m a ll a r e a t h a n i n a s t a t e t h e s i z e o f M ichigan. F o r example, t h e D epartm ent o f D efen se co n clu d ed a f t e r t e s t s i n 1979 t h a t even g e n e ra te c o lle c te d . a m ark et m i l i t a r y b a s e s were n o t s u f f i c i e n t l y l a r g e t o fo r th e em p ty n o n - r e f i l l a b l e c o n ta in e rs They r e p o r t e d l a r g e d e c r e a s e s i n b e v e r a g e demand on t h e b a s e s t h a t im p le m e n te d m a n d a t o r y d e p o s i t s . I n M ichigan t h e im p act on b e v e r a g e s a l e s wgs much g r e a t e r a l o n g t h e s o u t h e r n b o r d e r t h a n t h e a v e ra g e i n th e r e s t o f t h e s t a t e . 133 I n s t a t e s n o t c u r r e n t l y u n d er MBCDL as w e l l a s a t th e f e d e r a l l e v e l I t i s recommended t h a t c a r e f u l c o n s i d e r a t i o n b e g i v e n t o a num ber o f p o l i c y a l t e r n a t i v e s f o r m e e t i n g t h e d e s i r e d e n v iro n m e n ta l g o a l s . The 1972 EPA s tu d y p ro b a b ly o f f e r s t h e b r o a d e s t ap proach t o a n a l y s i s so f a r . The r e s u l t s o f t h e p r e s e n t s t u d y c o n f i r m t h a t t h e r e a r e b e n e f i t s t o MBCDL. However, th e s tu d y a l s o r a i s e s s e r i o u s q u e s t i o n s a b o u t some o f t h e m a j o r a ss u m p tio n s on which t h e p r o j e c t e d b e n e f i t s from t h i s ty p e o f p o lic y a re based. The b e n e f i t s a r e n o t c o s t - f r e e , a s o f t e n assumed, and a r e a l q u e s t i o n o f c o s t e f f e c t i v e n e s s can be r a i s e d . Assuming t h a t t h e a n n u a l c o s t o f t h e MBCDL i n t h e fo r m o f h i g h e r p ric e s t o s o f t d r i n k c o n s u m e r s w as o n l y h a l f o f w h a t i t co st beer consumers ( a c o n s e r v a t i v e a ss u m p tio n ) t h i s was a v e ry e x p e n s iv e p ie c e o f le g is la tio n . T h a t w ould p l a c e t h e c o s t a t a c o n s e r v a t i v e $100 m i l l i o n d u r in g e ach o f t h e f i r s t t h r e e y e a r s . s ta te T h i s i s a b o u t 20 tim e s th e an n u al l i t t e r p ic k u p c o s t and a b o u t one h a l f o f t h e t o t a l cost fo r m u n ic ip a l s o l i d w a s te p ic k u p and d i s p o s a l i n t h e whole s t a t e . The re c o m m e n d a tio n s f o r t h e b e v e ra g e i n d u s t r y a r e v e r y d i r e c t . In a s u rv e y con du cted i n 1981 a s background f o r t h e p r e s e n t s tu d y t h e r e was a l m o s t u n a n im o u s a g r e e m e n t among b re w e rs t h a t th e y would s u p p o r t some ty p e o f l e g i s l a t i o n aimed a t r e d u c i n g l i t t e r and s o l i d w a s te . At t h e same t i m e , th e *beer i n d u s t r y i s a g a i n s t a lm o st a l l form s o f l e g i s l a t i o n c u r r e n tly proposed. c o n ta in e rs, bases. a ll litte r T h e s e i n c l u d e MBCDL, b a n s o n n o n - r e f i l l a b l e t a x e s on b e v e r a g e c o n t a i n e r s and o t h e r b r o a d e r t a x The o n ly a c c e p t a b l e p o l i c y a p p e a r s t o be a l i t t e r t a x a d d r e s s i n g co m p o n en ts o f litte r. U n fo rtu n a te ly , th a t p o lic y does no t e x p e r ie n c e t h e bro a d b a se o f p o p u la r s u p p o r t which c h a r a c t e r i z e s MBCDL cam p a ig n s. T h e s e e l e c t i o n c o n t e s t s g i v e th e im p r e s s i o n t o many peo p le 134 th a t th e beverage in d u s tr y i s not a c c e p tin g i t s re sp o n sib ility . s u p p o r t so m eth in g . It is c o rp o ra te s o c ia l tim e f o r t h e b e v e r a g e i n d u s t r y t o a c t i v e l y I f a nominal b e v e ra g e c o n t a i n e r t a x , say one c e n t o r l e s s p e r m a n u fa c tu re d c o n t a i n e r , was championed by t h e i n d u s t r y i t s e l f , th e y could g a i n a g r e a t d e a l o f r e s p e c t from consum ers and p ro b a b ly even fro m many o f t h e g r o u p s w h ic h h a v e so v i g o r o u s l y opposed them i n t h e p a st. Such a t a x , earm arked f o r h i g h l y v i s i b l e program s such a s l i t t e r c le a n u p and a w are n e ss program s , a s w e ll a s p i l o t s o l i d w a s te management o r r e c o v e r y sy ste m s c o u ld have a s i g n i f i c a n t im p a c t o f th e i s s u e s a d d r e s s e d , b e n e f i t s o c i e t y and p r o v id e lo n g te rm p o s i t i v e p u b l i c i t y f o r th e beverage in d u s tr y . The i n d u s t r y s t a n d s t o g a i n resp ect as a r e s p o n s i v e t o s o c i a l and e n v iro n m e n ta l c o n c e rn s w h ile g u a r a n t e e i n g t h e c o n tin u a n c e o f " b u s i n e s s as u s u a l " i n t h e b e v e r a g e m a r k e t . S u re ly a u n i f o r m n a t i o n a l c o n t a i n e r t a x would be a diore p r e d i c t a b l e p o l i c y w ith s m a l l e r im p a c ts on t h e i n d u s t r y t h a n f i v e o r t e n m ore r e g i o n a l MBCDL p o l i c i e s o r n a tio n w id e l e g i s l a t i o n w hich a r e p o s s i b l e a l t e r n a t i v e s . F u tu r e R ese arch The p r e s e n t s tu d y does n o t i n c l u d e th e s o f t d r i n k i n d u s t r y . There a r e a p p ro x im a te ly th e same number o f f i l l i n g s s o l d o f b o t h s o f t d r i n k s and b e e r , b u t t h e i n d u s t r i e s a r e q u i t e d i f f e r e n t . t i e r s in th e d i s t r i b u t i o n T here a r e o n ly two c h a n n e l f o r s o f t d r i n k s a nd m o s t o f th e p a c k a g e s s o l d i n M ichigan a r e a l s o f i l l e d a t b o t t l i n g p l a n t s w i t h i n th e sta te . Given t h e s e d i f f e r e n c e s , t h e e f f e c t s o f a MBCDL o n t h e s o f t d r i n k i n d u s t r y may d i f f e r s i g n i f i c a n t l y from t h e b e e r i n d u s t r y . 135 The p r e s e n t s t u d y c o u l d be Im p r o v e d by I n c l u d i n g p r i c e s c o n v en ie n c e s t o r e s . from T h is m a rk e t f o r b e e r d i f f e r s from s u p e rm a rk e ts i n b o th th e ty p e o f p u r c h a s e s i t u a t i o n a n d i n t h e s i g n i f i c a n c e o f b e e r s a le s to to ta l s to re s a le s . The p r e s e n t s t u d y c o u l d be e x p a n d e d t o i n c l u d e o t h e r s t a t e s an d /o r s o f t d r i n k s . A s e c o n d t e s t o f t h e m o d e ls i n a n o t h e r l a r g e , i n d u s t r i a l s t a t e , such as New York, c o u ld be u s e d t o v e r i f y them. W ith in id e n tify M ic h ig a n w in e and s p i r i t sa le s c o u l d be m o d e le d t o t h e e f f e c t o f c h a n g i n g t h e minimum l e g a l d r i n k i n g a g e consum ption more e x p l i c i t l y . on T h is would check t h e v a l i d i t y o f t h e s m a ll e f f e c t a t t r i b u t e d t o t h e change i n t h e l e g a l d r i n k i n g age i n th e p r e s e n t s tu d y . On a la rg e r s c a le , a s t u d y i s n e e d e d w h ic h w o u ld i n c l u d e a l l s t a t e s which e i t h e r i n c r e a s e d t h e i r d r i n k i n g age o r i n s t i t u t e d a MBCDL, o r b o th . Comparing t h e r a t e o f change i n demand i n i n d i v i d u a l s t a t e s t o th e n a t i o n a l av erag e s i m i l a r e f f e c t s co uld be i d e n t i f i e d . R ese arch i s n e e d e d b n t h e e f f e c t o f t h i s l e g i s l a t i o n on c o s t a t a l l le v e ls o f th e d i s t r i b u t i o n sy stem . T h i s w o u ld i d e a l l y i d e n t i f y c o s t s f o r t h e v a r i o u s ways i n which d i f f e r e n t b re w e r s , w h o l e s a l e r s , and r e t a i l e r s have a d a p te d t o t h e p o l i c y . H o w e v e r, t h e d a t a r e q u i r e d f o r such a s tu d y may n o t be a v a i l a b l e . The a p p a r e n t i n e f f e c t i v e n e s s o f t h e 5 and 10 c e n t d e p o s i t system t o i n f l u e n c e consumer b e h a v io r opens a n o th e r avenue f o r r e s e a r c h . d iffe re n tia l d e p o s i t sy ste m a t r e a l i s t i c consum er b e h a v io r enough t o p u l l a d e s i r e d Can a d e p o sit le v e ls in flu e n c e c o n ta in e r th ro u g h th e d i s t r i b u t i o n system . C onsum er b e h a v i o r o f f e r s many a d d i t i o n a l a v e n u e s f o r f u t u r e 136 research . The work o f Crosby and T a y lo r i d e n t i f i e s a p o p u la tio n segment c a lle d e c o lo g ic a lly c o n c e r n e d consum ers. The p r e s e n t r e s e a r c h showed t h a t consumer b e h a v io r i n t h e m a r k e t p l a c e was n o t c o n g r u o u s w i t h t h e t r a i t s i d e n t i f i e d w ith consum ers f a v o r i n g p a sa g e o f a MBCDL. There i s a need f o r r e s e a r c h l i n k i n g th e b ro a d -b a s e d p o p u la r s u p p o r t o f th e M ichigan MBCDL ( a t t i t u d e s ) w ith b e h a v io r . A lte rn a tiv e p o lic ie s f o r m e e tin g th e b road g o a ls o f s o l i d w a ste re d u c tio n , litte r a b a t e m e n t , and r e s o u r c e c o n s e r v a t i o n n e e d t o b e id e n tifie d . T here may be more e f f i c i e n t m eans o f m e e t i n g t h e s e g o a l s which t h e c u r r e n t s i n g u l a r s t r e s s on m andatory d e p o s i t s p r e c lu d e . APPENDICES APPENDIX I Data Used i n t h e Study M ichigan Ttotal Michagan T o t a l P e r s o n a l In c a n e g P e r s o n a l In can e „ ( c u r r e n t $ x 10 ) (c o n s ta n t $ x 10 ) 1954 178.311 14354.C 5-5 -• 1 5 9 * - j . O 198.254 56 • 1 6 5 2 9 . 0 213.059 57 • ' 1 6 6 7 3 . C 2CC.119 56 « 1 6 4 7 8 . 0 290.277 59 • 1 7 4 6 2 . 0 210.252 • 2S2C3.C 21-5.22 C • 16131.0 212.355 62 • 1 9 3 2 2 . 0 213.245 63 9 2 C 7 3 7 .r 226.685 64 • 2 2 7 0 1 . 0 244.36 0 ^5 • 2 5 3 5 F . G 269.762 2:4.774 • 2 7 6 2 C* C 67 • 29142.0 291.421 68 • 3 2 2 6 1 . 0 319.597 69 • 3 5 0 7 6 . C 319.472 ■f» «*, • 36124 *0 310.610 71 • 39166 . 0 3 2 3 . C67 72 • 4342 =•0 346.592 7 ? • 48 4 3 7 . 0 364,16r 74 • 5 1 6 7 4 . C 349.858 75 • 5 4 4 6 3 . C 3 37,86 0 76 ♦ 6 1 * 9 5 • G 361.616 77 « 6 9 2 9 1 . C 391.769 76 • 7 7 7 7 7 . 0 3 9 6 . 5 4 '! 79 • 6 5 9 9 2 . G 3 9 5 . 5 Cl FO • 9 1 6 5 3 . 0 361.530 ■*£ 1.4CC 61 • 9 5 : 1 7 . 0 .. w ^ 9 • * »• 82 • 1 1 0 6 6 6 . 349.212 6 3 • 2 1 6 5 C7 . 355.973 Michigan CPI Beer c a • 3C CT e c. • 6 C O f r * c - • r, J C t l* 91 • 7 C 0 C 91 • ec- or 92 . 3 0 or 93 . 6 0 o o C 1 . FT oc * 94 « 3C < /• * p cc s - . c r- r- r Q C • 8 0 CO cc. ’ r r.r•%. 1 ”:.c V 1C2. F0C-: 1 0 5 . 4 00 i r t—• c: - f** w *. i : 2.6 g : t a r. r a r. 11 3 . 6 1 2 6 . F 'jr 14 : . 3 r r* 14 3 . 1 r. r 1*7.2 16 -■. V 2 5 19 1 . 5 ' T c . '.. . r- L‘ «. t . c . e . • c. w W 21 5 . 3 p : . g w vj Michigan CPI M ichigan R e l a tiv e Beer P r i c e In d e x 1.10532 f t . 4 lT c F.4.3fOG 66 •6 or 67.3T 5 z 8 9.7CC-G F s.src r? s .$ ::c 9 3 . 5 DC-C 92.e:3c 96.7'TC 2 1 3 . cor 1 0 4 .3 : 0 1 1 J.6CC 1 1 7 . 4 “:C X sL X « f Ww 1 c r*• c *JJ 174,50: 1 4 ? . COT 157. l?r. i5 5 .g r : 2 3 C .4 -:: 1 9 4 .id: 215.75: 2 5 2 . iOG 2 7 3 .ic: 2 9 2 . 4C'. 23 c .c r: 1. 1 C474 1.10565 1 .05776 1.05774 1.05727 1.0552 4 1.04666 2 .0«C 64 1.037-6 1.03225 1.C243* 14 . Cp1rt1f*3 2•' ± * t i w.- V i. .9 6 6 5 6 4 .95952 7 .9 3 6 271 •93075. .9 c sc :e .66652' .55 6457 .6 7 C 3 4 7 .539256 •811019 .616623 .88C-66 5 .630275 .525712 .74472: .735294 PRICI NC 16 _ . 7 3 c 175.456 1? 3 • 6 5 1 1 9 3 • c £ c176.691 15 9 . 4 : 4 194.47c 1 5 3 . 2 C4 2:4.6'2 1 . 5 r0 226.715 262.376 2 B1 . 5 c ’ 251.420 3 1 2 . c 13 3 3 2 . F 1>c 3 3 1 . 7 17 34 7 . 1 - 4 3 61. 2 c2 42 9 . I T 417.524 36P.:c : 425.665 4 ? :.727 4 F? . 1 1 6 44:.952 4 2 5 . 4C6 4 4 5 . 6 21 467.571 464.123 to *«4 138 A nnual B eer S a le s i n Thousands o f B a r r e ls M ich igan B eer 1 9 5*i 6b 6£ 57 5b 59 £0 £1 £2 6? 64 65 £6 fi-7 68 €9 7 0 71 72 73 74 75 76 77 78 79 to 81 ... , , , . . . . • .,, ,. . . . , , . . , , . . ft? . 83 . . 519 3 .0 0 5427.00 5385.:0 5 2 1 9 . JO 5061.00 5235.00 5211.00 52 4 0 . 0 0 5219.00 5187.00 547 2 .0 0 5521.00 5744.00 58 0 5 . 0 0 5993.00 6025.00 £257.00 63 C l . 0 0 6496.00 6 7 6 4 . 0C 6843.00 7044.00 7126.00 7263.00 7293.00 7027.00 6939.00 6 9 01 . 00 6926.00 6900.00 O hio B eer 1954 55 56 r»7 5f t 59 60 61 6? 67 64 65 66 67 68 69 70 71 72 73 74 75 7f , . . . . . . . . • . . . . . . . . . . . . . . . . 77 7b 79 WO 81 . PS . 83 , , 553 8 5582 556 5 5355197 5460 5 5 0 8. 552b 55 68 5695 5911 60 0 0 6017 6258 6375 £380 6769 6765 6735 7023 7061 7 2 P. 5 7330 7 6 Ci b 7316 6203 64 77 6215 8549 8287. 00 00 00 ■:-c! uU CG DO DO CO 00 DO 00 00 00 CO 00 00 00 CO 00 Ou 00 00 GG CC 00 00 00 00 00 I l l i n o i s B eer • 5-7 1 5977 61-34 f ’ 15 5 804 5 79 6 £ 095 610 0 6 161 £ 254 6529 6536 6666 6651 6 7ft3 6 80 5 7103 7244 7244 7360 7741 8 022 8153 6 43 3 8 694 9128 9207 9304 .9167 9275 u0 DC 0W 00 G0 00 C0 GC 00 00 00 Ou 00 00 60 00 00 6C i c 00 00 yo 00 00 00 0c 06 C0 00 .00 W isco n sin B eer 3 014 3 101 3i:.9r 3 Ci 7 3113 3196 3267 33G3 3 26 4 3376 3520 3509 3620 3627 3714 3647 3919 4 071 4152 4 316 4413 4721 4 6 C7 4£49 4 75 2 5 023 520 1 5 245 5 22.4 5215 uij G V V’ GG uQ L- 0 j 'w V w u0 G0 uD uG GD G0 bb i b GG 00 0Q Ij GG JO GG C0 DO 00 CG GO 00 .00 In d ia n a B eer 2149 U 2 1 . 9 9 [' c2 2 2 1 Ci j 217 6 00 2 1 2 6 GC 2 2 4 4 DO 2 2 6 0 Gt 2 2 5 3 00 2 2 7 5 C0 2 2 8 4 U t. • 2388 00 2 4 G6 0 0 2424 u0 2 4 8 7 Of! 2564 00 2 6 4 3 C)'"* 2 7 1 1 CO 2 7 7 1 DC 27 96 0 0 2 8 7 2 CG 2 9 72 0 0 3 * 1 8 00 3 1 6 9 C0 3370 0u 3 5 9 2 CO 3 6 6 5 GO 3 S 7 4 CO 3 9 4 8 CO 3 9 7 3 CO 3935 .0 0 N orth Centred. Four S t a te A verage 4141 4214 4 2 2ft 4 1 54 4 06 0 4174 42£2 4295 4326 4402 4586 4613 4661 4755 4859 4918 51 2 5 5212 5231 5392 5521 57 61 56 1 4 6*14 6213 6509 £6f 9 6679 6575 00 50 75 00 00 50 50 50 50 5G 50 25 75 75 DC 75 50 75 75 75 75 50 75 5C 5 0 7r 75 tie 00 139 P o p u la tio n in Thousands P o p u l a t i o n 18 -2 0 5455 56 ~7 56 59 60 61 &2 63 6* 65 66 67 68 69 70 71 72 73 74 75 76 77 76 79 80 »r 82 83 • «• • • •••••• 272 0 0 u 273 000 275 000 278 2 0 0 2 8 0 QUO 262 000 284 0 0 0 3 0 3 i: o o 323 5 9 9 341 0 0 0 3 6 1 0 00 380 ooc 410 0 0 0 4 3 9 ij V U 4 4 0 uO 0 4 5 8 ?t*0 476 000 5 0 3 0 0G 52 1 000 532 coo 541 00 0 5 5 5 r: 0 U 5 6 2 0 00 566 0 0 0 5 6 0 0 D0 5 5 4 00 0 544 o r 0 541 0 0 0 535 a ro 5 3 5 o :■o P o p u l a t i o n 20 -4 4 P o p u l a t i o n 44+up • • » 2 3 8 7 v' 'J 2513 *0 2 5 4 3 00 2 5 1 6 C' 0 2 5 0 5 Li 0 2 4 6 B CD 2 4 3 7 Go 2 3 9 6 t’ C 234 0 0 y 2 3 3 P WI* 2 3 36 0 0 2 4 1 3 GC 2 4 5 7 UO 2 4 7 6 02 2 5 05 0 0 2 567 0 0 2 6 4 2 GO 2 7 0 3 oc 2764 o 0 2 8 29 o ; 2 *9 3 0 0 2 9 4 6 GC 3 1 3 GG 3 0 9 5 L>U 31 26 0 0 3272 00 3 258. : o 3312 o c 3323 0 0 3 3 2 3 00 19 09 1 4? 1 1 5 4 f* 1922 198G 2 ? 65 2143 2241 2 3 53 2412 247 0 2450 2435 2446 2534 2526 25G6 25 36 2554 25 74 2592 2 6 06 2 616 2629 26. 4 0 2644 2 7 or 2623 2544 2544 0 !• 0^ 00 r Ow Cy CO y0 00 G0 u0 CO CC CD 00 "l .* % *-» 00 0i 00 Of GO • t u •jf GO V L. GO r r. 0; 0 CG Michigan Unemployment 1954 5b 56 57 56 59 60 i l 62 63 64 65 66 67 66 69 70 71 7? 73 74 75 76 77 78 79 80 61 3? 83 P o p u l a t i o n 1 8 - 44 2655 0 0 27 8 6 0 0 OD1 t. 00 2794 2785 2750 2 7 21 2699 2663 2679 2697 2793 2967 2915 2945 3 C-2 5 3119 3206 3 2 Po 3361 3435 35C1 3575 3661 3746 3825 3 P- 0 2 3B53 3858 3855 00 00 ( r a t e i n %) • i 6 oj v .7 0 0 0 0 ( .50000 .60000 ..8000 00 f. . 5 0 0 0 0 00 6 .90000 00 00 oo aci oo oo oo oo oo oo 00 _ .70000 1 0 *2 0 u0 00 00 CIO 9 4 . 3 GC 0 6.50000 7.80000 12.6000 12.3000 1 1 2 .9 0 0 I I 3 . ° O' 1 1 5 .6 0 0 12 6 . 8 0 0 14 0 . 3 0 u 1 4 3 .7 0 0 14 5 • 90 C 1 6 0 . 5 D0 17 7 . 6 0 0 1 9 3 .7 C 0 c r>, !4 • 7 0 0 1 1 . 5 G0 0 ’ 2 6 » 3 C0 000 j 0 „ .5000C 12.5C*0 5 •4 00u0 00 9 2 . 3 0 GO 93.60 0 0 93 . 8 0 0 0 , 6 C 0 b- w 00 00 00 91 » 6 fl CC 55.1000 95.50': 9 6 . 8 C DC 9 8 . 3 3 CC GO 00 00 00 8 9 . 3 0 5 f1 35.6000 5 . oc r j 51.7000 5 . 5 0 Gu 0 4.80000 3 , 9 0 0 00 3 . 5 0 0 uG 4 , 600j u 4,30000 4 . 000u0 ,0 0 0 0 0 C OOOC 00 C P I B l EK e. 2 oooo lr.soc c 10 3 . 0 ZI 1 02 . P0L I 0 5 . 4 C0 10 8 . 9 0 :1 4 • 1 0G «• «• 1976 1977 1978 1979 1980 1981 1982 1983 PPI B o t t l e B eer 144.=00 145.600 147.500 146.90C 1 5 2 . 6 0C 155.000 164.700 167.000 1 6 1 . 2C0 167.:00 1 9 2 . 10C 152.200 1 9 2 . 6 GC 1 5 * . f t !? C 2 0 3 . 1 0C 2 0 7 . 2 CB PPI Can B eer • ••• ••••»•••• 1 3 1 . 90L 1 2 2 . CCC 234.20 0 235.660 136.600 1 4 3 . P0C 154.660 1 2 7 . 5 GC 169.200 1 7 1 . fetC 17P.9CC 1FC.P0C1 6 4 .6 00 195.400 1 = 7 . CCC m i.5 0 C CPI B eer a t Hora 142.500 1 4 4 . CCC 1 4 5 . CCC 1 4 6 . 6CC 15C.6GC 156.803 1 6 6 . IOC 1 7 2 . 2CC 191.50" 1=1.60: 257.600 2C- 3. FCC 2 0 6 . 4 00 221. so: 2 1 9 , ICO 2 2 6 . 3C0 • • • • i I n d ic e s where S p r in g ,1976 = 100 PPI PPI CPI B o t t l e In d ex Can In d ex B e er In dex I*. ...... ........i . CGOu .......... l . OGOCCi C1.00483 1.0179^ 1 • l' 2 7 6 1 1.0331ft 1 • C£ 9 7 C 1.13665 1.15252 1.251-52 1.25055 1.3257ft 1.32cft3 1.33057 1.34161 1 .4 0 097 1.42557 1.0CC-76 1 • 0 1 7 ft4 l.G26t;2 1 • 0 5 CEO 1.C9C22 1.1721C 2.19419 1.28279 1.3C099 1.3583? 1.3707ft 1.39555 1.46143 1•4=356 1.52767 i.ccrc; 1 . 0 1 G33 1.0173ft 2 .0 2 6 7 7 1.05523 1. 1 0 D3 5 1 .U 5 6 : I.2C51Z 1. 2736f t 1.34456 1 . 3 6 6 6-7 1.43C-:ft 2 .4 6 2 4 6 1 • ft P ft c : 1.5373.fi 1 . 56 6 -7 o R e t a i l In d ex R a t io s to CPI B eer In d ex R e t a i l Can R e ta il B o ttle S tr a te g y I S t r a te g y I I 1976 1977 1978 1979 1980 1983 i.oooor .96556 3 1.02405 2.01267 1.03231 1.03099 1.06141 2.1CC41 1.1469C 1 • 0 B6 4 4 1.11706 1.0332C .963423 .495766 1 . C 2 "22 .964229 : .oroo • 5fc95=3 2 . 0 2 4 05 1.01267 1.03231 1.03099 2.06141 1 . 2 20-41 1 .14650 1 .06.644 1.11728 2 .0 631 : 1. 06677 2 .0526 0 2.06758 1 .0 0167 1 . 0 GO CO .569563 1.04100 1.02563 1.04556 1.0474= 1.1436= 2.16399 1 * 1 5 9 04 1.15032 1 . 1 7 3 0ft 1.1373= 1.31096 •5=5654 1 . 7 4 6 33 .956965 W h olesale In d ex R a t io s to PPI I n d ic e s W h o lesa le Can i.30!,:.O • 9 ?9 38 1.0410-: 1 * 02663 1.04996 1 . 3 4 74ft 1.14396 1.16365 1.19604 1.150-32 1 • 27 3 r 5 i .13735 1.1122ft 1 . ""5 5-fi 6 1.1157? .93£585 1•003ou 1.01694 1• 10364 1.01402 1.C3731 2.06053 1.0=461 2.10-626 1.10475 1.0=7*2 1.12193 1.12135 1.2176S 1.10566 1.13367 1.1117£ i.GCClv .99524 Z 1 . C 3 C ft 1 1 , 0 5 7 <* 0 2.05636 2.051-3 1 . OS7 -;6 1.09537 1.99713 : .1153? 1.1C366 060=4 i.ocnft 1 . - 8 25 7 1 . 0 3 7*i 2 :. 141 R e t a il B o t t le In d ex Compared w it h W h o le s a le S tr a teg y I S tr a te g y I I 1976 1977 1978 1979 1980 1981 1982 1983 • 0 000 0 97s61ft .0 1 9 7 4 . 0 V0 0 0 « 0 G0 G0 . 00uJC • 04167 • G4 16 7 . 057 3b .0 4 0 9 2 .04143 .04143 9 47 26 9 998117 567654 984127 1 « 000 J 0 « 97 8618 1.01974 1 .0 0 0 U 0 1 *00uu u 1 .0 0 0 0 0 1.04167 1 04187 1 ,0573b 1 ,04052 1 04143 1 ,0 4 1 4 3 1•050a5 1.05065 1 .03351 1.00176 R e t a i l Can In d e x Compared w it h W h o le s a le S tr a te g y I • S tr a te g y I I 1976 1977 1978 1979 1980 1981 1982 1983 . 0uJ00 * 0 j 0 Ci 0 .02935 999462 • 00000 996914 .03333 .03333 ,05597 .03359 .07525 •07525 977326 977326 997813 97D3P0 1 .CUOuG 1 .0 0 0 0 0 1.02935 ,999462 1 • 0 0 UGG .998914 1.08333 .06333 .-08597 .08359 .0752 5 .0752 5 . 07525 • 0 6 2 C. 1 9 7 03 LC W h o le s a le B o t t l e B rew er B o t t l e I n d e x Compared In d e x R e l a t i v e t o t h e PPI w it h B r e w e r s 1. 1. 1. • A• 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. 0000J 0 0 384 0 0364 0ul59 02359 03855 0824 r 1104 9 16037 14424 17412 14376 14 9 7 C 14970 1 4 ft 0 6 14806 W h o le s a le Can I n d e x Compared w it h B r e w e r s • u ii L‘ LI I! .0 0 0 0 0 961298 .01064 . 03551 . C5149 .06777 • 1 1 6 38 .17397 .15826 .18921 • 155 06 . 1 5 5 56 . 1 5 5 06 .18724 .14444 • 0 0 U0 j .01304 999994 . :.i2 4 i . 01341 .0 2 078 . n 5 'i a 9 9 . 0 1209 9 52 072 9 5 0341 9 5555 3 9 60411 972305 964302 9 87 48 7 966388 B rew er Can In d ex R e la tiv e t o t h e PPI 1 • 0 Q0 0 0 .995242 i .03070 1.02006 1.02114 1 . 0 0 fc 5 4 • 9 8 3 41 C .974567 . 9 33 04 u .947206 .937916 .956496 .976625 . c>6 4 1 04 .910953 .923957 142 APPENDIX I I O ther v a r i a b l e s b e s te d I n Model I I ( A ll s t a t i s t i c s b a s e d on 1954 - 1978 p e r i o d . ) Economic 1. P r i o e t h e r e l a t i v e b e e r p r i c e i n d e x c o r r e l a t e d p o s i t i v e l y w ith b e e r s a l e s ( . 9 6 ) b u t was r e j e c t e d from t h e m o d el d u e t o i t s h i g h ( . 9 4 ) , i n t e r c o r r e l a t i o n w ith inoome. 2. P e r s o n a l Inoom e c o r r e l a t e d p o s i t i v e l y w ith b e e r s a l e s ( . 9 6 ) b u t was r e j e c t e d due t o h ig h i n t e r o o r r e l a t i o n w i t h p r i o e . 3. P e r C a p i t a In o o m e - w as p o s i t i v e l y c o r r e l a t e d ( . 9 5 ) b u t w as r e j e c t e d i n f a v o r o f t o t a l p e r s o n a l in c o m e t o a v o i d e n t r y o f a p o p u l a t i o n f a c t o r i n th e income v a r i a b l e . 4. B u y in g Power I n d e x p r o v i d e d s i m i l a r e x p l a n a t o r y power t o t o t a l in o o m e . I t w a s r e j e c t e d i n f a v o r o f t h e m ore commonly known fig u re . 5. P r i c e o f Wine w as o n l y a v a i l a b l e f o r t h e p e r i o d 1977-1983. y e a rs o f p r e - l e g i s l a t i o n b a s e p e r i o d w ere fo u n d to o s h o r t f i t t i n g t h e m odel, even u s in g m onthly d a t a . Two fo r f.9Pnlatign -Variables. 6. P o p u l a t i o n 18 y e a r s o l d a n d o l d e r was i n v e r s e l y r e l a t e d t o b e e r s a l e s o v e r t h e s h o r t e r 1 9 5 4 -1 9 7 1 a n d 1 9 5 4 -1 9 7 4 t i m e p e r i o d s m eaning t h a t as th e p o p u l a t i o n i n c r e a s e d b e e r s a l e s w ere p r e d i c t e d to d e c lin e . 7. L eg al D rin k in g P o p u l a t i o n was a l s o i n v e r s e l y r e l a t e d t o b e e r s a l e s f o r t h e s h o r t e r tim e p e r i o d s . Jtfnitg. for, .the.-Variable a 8. M o n th ly d a t a was t r i e d , how ever, g iv e n t h e h i g h l y s e a s o n a l n a t u r e o f b e e r s a l e s a n y 12 m o n t h p e r i o d r e a l l y f o r m e d o n l y o n e in d e p e n d e n t o b s e r v a tio n . A ls o , p o p u la tio n e stim a te s a re y e a rly and income q u a r t e r l y so m onthly d a t a was n o t u s e d . 9. Log f o r m s o f t h e v a r i a b l e s w ere t r i e d ( a s found i n s e v e r a l o t h e r m odels o f b e e r s a l e s ) . The e x p l a n a t o r y power was n o t im proved. 10. E x p o n e n t i a l v a r i a b l e s w e re t r i e d . power was n o t im pro ved . Once a g a in th e e x p lan a to ry 143 APPENDIX I I I Michigan Counties HWMj DOM INION OP CA NAD A tmsmatl Z$i ♦ / (Ml jr . s / £ MlfOK tttCO J/ S 4*c*«c out** M tc e S liH U ItU * w»iMO UHCI 1 ;t:4^TUv« » « ' Cl«* (C A N A D A • -j/ /' J" ' "j | “» , — " | 1 i/V***''«•«« t o t t s t - 1’— i--------j k ^ LA — -V-h-t-o-1— 4 % * . ^ 144 APPENDIX IV Sample W eigh ts o f Michigan. B eer P ackages i n Use Deoember 1Q83(1) H e ig h t i n Ounoes Average Weight i n Ounces 9 .1 8 .9 9 .0 10.9 10 .7 10.8 B o ttle s* STANDARD S e l e c t "M ichigan" B o t t l e 3 Pabst S tr o h EXPORT3 M ille r L ite tfeidemah HtSt I S l R tfllla h ls, B udw eiser M ichelob . Fal s t a f f M ille r M ille r L ite S ig n a tu re Molson Moosehead Gsd s L M ille r L ite Pabst B udw eiser S tro h Old Milwaukee Hamm's S o h litz 9 .2 9 .4 6 .4 9 .1 (4 ) 7 .4 7 .4 9 .0 8. 1 8. 8 7 .6 (5 ) .6 7 .6 7 .6 3 . 66 .64 .68 .6 7 .66 1. A c o n v e n ie n c e sam ple was drawn from c o n t a i n e r s i n use i n E a s t L a n s in g M ichigan i n December 1983. 2. W eight o f g l a s s o n ly . w e ig h in g . 3. Both b o t t l e s a p p e a re d t o have been u sed b e f o r e and were m a n u fa c tu re d by d i f f e r e n t b o t t l e m a k ers. 4. W eighted a v e r a g e b a s e d on m a rk e t s h a r e . (.3 3 ) ; F a l s t a f f (.0 7 ) 5. W eighted A verage b a se d on m a rk e t s h a r e M i l l e r ( . 4 ) ; L i t e ( . 3 ) ; S i g n a t u r e ( . 1 ) ; Molson ( . 1 ) ; Moosehead ( . 1 ) 6. A ll c a n s a r e two p ie o e aluminum draw and i r o n c a n s w ith s t a y - o n ta b s. L a b le s and c l o s u r e s w ere removed p r i o r t o B u d w eise r ( . 6 ) ; M ichelob 145 APPENDIX V Change i n Michigan. Beer P r i ces from. 1976 Base:__ B o ttle P r ic e s Cents per C o n ta in e r D o lla r s per Case T ear 1976 Actual Beer P r ic e P r e d ic te d P r ic e s Base + In fla tio n Michigan P r ic e D if . A ctual P r e d ic te d In fla ­ tio n (1976 Base) ____ T o ta l P r ic e Change Per C o n ta in e r Michigan P r ic e D if . Per C o n ta in e r In fla ­ tio n S ince 1976 Per C o n ta in e r ____ ____ ____ ( - 0 .0 3 ) 0 0 .3 -0- 7.14 7.14 7.14 7.21 (-0 .0 7 ) 0.07 1977 7.44 7.4 4 7.21 7.28 .23 0 .16 0.07 0.14 00.9 00.6 00 .3 00.6 0 1 .2 01 .2 1978 7 .8 0 8 .1 0 7 .57 7.85 0.23 0 .2 5 0.43 0.71 00.9 00.9 01.8 0 3.0 02 .7 03-9 1979 9 .0 0 9 .5 0 8.35 8.57 0 .65 0.93 1.21 1.43 02.7 03.9 0 5 .0 0 6 .0 07.7 09.9 1980 10.43 10.43 9.14 9.57 1.29 .86 2.00 2.43 05.4 03.6 08.3 10.1 13.7 13.7 1981 11.06 11.06 9.92 10.14 1.14 0 .92 2.78 3 .0 0 04.8 03.8 11.6 12.5 16.4 16.3 1982 10.61 10.88 10.42 10.57 0 .19 0.31 3.28 3.43 00.8 01.3 13.7 14.3 14.5 15.6 1983 11.46 11.26 10.85 11.14 0.61 0 .1 2 3.71 4 .0 0 02.5 00.5 15.5 16.7 18.0 17.2 146 Change In M ic h ig a n B e e r P r i c e s from 1976 B a se ; Cents per C o n ta in e r D o lla rs per Case Xe a r 1976 Actual Beer P r ic e P re d ic te d P r ic e » Base + In fla tio n Michigan P r ic e D if. A c tu al P r e d ic te d g.a.n_J’r.l.