1
$\begingroup$

I need to demonstrate an impact of implementation of incentives or penalties for decision-making on a scale of society. For example: If you increase taxes alcoholic drinks it should reduce the number of people drinking but by how many? How effective will it be? There must be a mathematical theory exploring this field but after a quick search I found decision or game theory branches that are dedicated to for an individual or are focused on how to win poker... Popular science Could you point me in the right direction by giving some links to books or just google keywords to research?

$\endgroup$

1 Answer 1

1
$\begingroup$

I would use difference in differences (DID or DD for short):

Difference in differences is a statistical technique used in econometrics and quantitative research in the social sciences that attempts to mimic an experimental research design using observational study data, by studying the differential effect of a treatment on a 'treatment group' versus a 'control group' in a natural experiment.

It calculates the effect of a treatment (i.e., an explanatory variable or an independent variable) on an outcome (i.e., a response variable or dependent variable) by comparing the average change over time in the outcome variable for the treatment group, compared to the average change over time for the control group.

Source: wikipedia

In your example:

  • The independent variable are taxes
  • The dependent variable is consumption
  • The treatment and control groups may be similar countries or geographies, such as UK and Australia
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.