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Factors Determining the Demand for Choice of Type of Alcohol Beverage in Kiambu
County
DENNIS GATUNE WAHOME
K102/CTY/PT/26879/2013
RESEARCH PROPOSAL SUBMITTED FOR PARTIAL FULFILMENT OF
MASTERS IN ECONOMICS OF KENYATTA UNIVERSITY
AUGUST 2014
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Declaration
This proposal is my original work and has not been presented for any degree or other award
in any university
Signature……………………………
Date…………………………
DENNIS GATUNE WAHOME
M.A ECONOMICS (Policy and management)
Reg: K102/CTY/PT/26879/2013
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Dedication
This proposal is dedicated to my parents, Mr. and Mrs. Wahome for financial help and my
colleagues Dennis, Zabron, Timothy, George, and other classmates for their support for this
to be successful.
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Acknowledgements
First and foremost my sincere gratitude and thanks is to the Almighty God who
supplied the strength and capability to accomplish this work.
Secondly, am greatly indebted to my lecturer, Dr.Perez Onono, for her valuable
lectures and guidance throughout the writing of the proposal.
Lastly, I would like to appreciate Dr. Karanu for his support and encouragement.
Finally, I thank my colleagues Dennis, Timothy, Zabron and other classmates who created a
good teamwork during my studies. I also appreciate the input from my fellow students who
gave valuable comments and critiques that went along way to improving the quality of my
work.
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List of Figures
Figure 1.1: Determinants of Drinking ...................................……………………………..21
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Abbreviations and Acronyms
Alcohol : is an alcoholic beverage produced by distillation of a mixture produced from
alcoholic fermentation, such as wine.
Illicit Brew: It is alcohol that is considered illegal by the government.
Liquor: a strong alcoholic drink
Elasticity : Elasticity is the measurement of how responsive an economic variable is to a
change in another variable.
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OPERATIONAL DEFINATION OF TERMS
NACADA
National Agency for the Campaign Against Drug Abuse
ANOVA
Analysis of Variance
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Table of Contents
Declaration .............................................................................................................................................. 2
Dedication ............................................................................................................................................... 3
Acknowledgements ................................................................................................................................. 4
List of Figures ......................................................................................................................................... 5
Abbreviations and Acronyms ................................................................................................................. 6
OPERATIONAL DEFINATION OF TERMS ....................................................................................... 7
CHAPTER ONE : INTRODUCTION .................................................................................................... 9
1.1 Background of the study ............................................................................................................... 9
1.2 Statement of the Problem ............................................................................................................ 11
1.3 Research Questions ..................................................................................................................... 12
1.4 Research Objectives .................................................................................................................... 13
1.5 Significance of the study ............................................................................................................. 13
1.6 Scope and limitation of the study................................................................................................ 14
1.7 Organization of the study ............................................................................................................ 14
CHAPTER TWO. LITERATURE REVIEW ..................................................................................... 15
2.1 Introduction ................................................................................................................................. 15
2.2 General Literature ....................................................................................................................... 15
2.2 Specific Literature ....................................................................................................................... 18
2.3. Overview of Literature ............................................................................................................... 20
CHAPTER THREE: METHODOLOGY ............................................................................................. 21
3.1 Introduction ................................................................................................................................. 21
3.2 Research design .......................................................................................................................... 21
3.3.Theoretical Framework ............................................................................................................... 21
3.4 Model Specification .................................................................................................................... 27
3.5. Working Hypothesis .................................................................................................................. 29
3.6 Definition and measurement of variables .................................................................................. 29
3.7. Study Area ................................................................................................................................. 30
3.8 Sampling techniques and sample size ......................................................................................... 31
3.9. Target Population ....................................................................................................................... 31
3.10. Data type and source ................................................................................................................ 31
3.11 Data Collection ......................................................................................................................... 31
3.12 Ethical Issues ............................................................................................................................ 32
3.1.3 Data Analysis ........................................................................................................................... 32
References ............................................................................................................................................. 33
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CHAPTER ONE : INTRODUCTION
1.1 Background of the study
Beer making began almost as soon as people domesticated barley to make bread
around 8000 Before Christ (Goodwin, 1999). Stone-age culture that survived into the
twentieth century or modern times has been familiar with the manufacture and use of alcohol.
Early European explorers in Africa frequently found out that alcohol was important in the
local cultures. Across the continent, alcohol has been used medicinally and in religious
ceremonies for thousands of years. According to Goodwin (1999) alcohol has a long history
of recreational use.
It’s safe to say that alcohol is both a tonic and a poison. The difference lies mostly in
the dose. Moderate drinking seems to be good for the heart and circulatory system, and
probably protects against type 2 diabetes and gallstones(Harvard School of Public Health,
2014). Heavy drinking is a major cause of preventable death in most countries. In the U.S.,
alcohol is implicated in about half of fatal traffic accidents. Heavy drinking can damage the
liver and heart, harm an unborn child, increase the chances of developing breast and some
other cancers, contribute to depression and violence, and interfere with relationships(Harvard
School of Public Health, 2014).
Alcohol is the most widely used and misused substance in America (Varcorolis,
1990). Swadi (1988) reported that in Britain young people start drinking alcohol by the age of
thirteen and their drinking increased to ninety percent by age of seventeen. According to
Swadi, similar findings have been reported in Scotland by the age of sixteen. A survey
carried out among three thousand adolescents in six schools in London showed that two
thirds had used alcohol and that one in nine, were frequent and possibly heavy drinkers
(Swadi, 2005). In Africa, culture restricts consumption of alcohol to elders' and important
cultural occasions such as after the birth of a child, after harvesting crops and during funerals
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(National Agency for the Campaign Against Drug Abuse, 2007). Even then, only elders have
the right to take alcohol (NACADA, 2007). According to the same study, alcohol
consumption is no longer restricted to elders or special occasions. It is readily available to
adults and youth between ten to twenty four years, though the law prohibits its sale and use
by people below eighteen years (NACADA, 2007).
Between 2001 and 2002, NACADA conducted a survey on alcohol use in Kenya,
which revealed that alcohol use was widespread. Another survey by NACADA (2007) further
revealed that the national alcohol prevalence was 24.9percent but varied from province to
province, with Western Province having the highest prevalence of 43percent followed by
Nairobi Province 41percent, Nyanza 27percent, and Central 26.3percent. Rift Valley and
Coast each had a prevalence of21 percent, Eastern 17percent and North Eastern 2percent. The
tendency towards alcohol use and misuse may be influenced by many psychological and
socio-cultural factors, including weak law enforcement, peer pressure and sale of alcohol in
sachets (NACADA, 2007).
Alcohol demand has increased over the years despite the high taxation by the
government of Kenya. The taxation of alcohol has formed a reliable base for collecting high
revenues which have been used to supplement other government revenues. In spite of the
high taxation, alcohol consumers still consume the alcohol beverages and still cope with the
high prices. Much of the relationship that has been observed in the past is that when prices of
alcohol have gone up by a large extent, low income earners resort to cheaper drinks while
some continue consuming their favorite brands despite the increase in prices. The study seeks
to investigate the factors that affect individual consumers especially when it comes to
choosing a particular alcohol beverage over the other. In Kenya, the available brands of
alcohol drinks are many but 5 are the most widely used. The brands include wines and
champagne, beer, spirits, traditional liquors and illicit brews. Despite having many people
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consume alcohol as a way of enjoying themselves, some alcohol brands cause deaths yet
some people still consume them. It is of paramount importance to study why drinkers
consume the different types of alcohol and what mostly influence them to take the drinks
despite some drinks such as illicit brew having lethal effects.
1.2 Statement of the Problem
According to the World Health Organization (WHO), approximately 2 billion (33
percent) people worldwide consume alcoholic beverages (WHO, 2004). Despite the adverse
effects that alcohol consumption causes to the human lives, alcohol consumption around the
globe is still on the rise. According to a survey conducted in 2012 by the National Authority
for Campaign against Alcohol and Drug Abuse (NACADA), 13.3 percent of Kenyans indulge
in alcohol consumption. The widespread use of alcohol is fuelled by ease of its production
process (i.e., a plain process of fermentation achieved by yeast acting on sugar) and multiple
daily usage for recreation, curative and religious purposes (Basangwa et al., 2006). In spite of
the negative effects of the alcohol, its production has increased over the years due to large
demand. In addition, producers of alcohol have come up with so many categories of alcohol
and blends in order to satisfy the ever growing demand.
Research by the National Authority for Campaign against Alcohol and Drug Abuse
(NACADA) only indicates the negative effects and impact of alcohol on people. Very few
studies have endeavoured to investigate the reasons as to why a consumer chooses a
particular type of alcohol over the other despite having many brands of alcohol. Nevertheless,
some types of alcohol have more lethal and adverse effects than others, yet people continue
consuming them. Despite the increase in demand for the alcohol, types of alcohol beverages
are easily available, accessible, and affordable through different avenues based on different
prices per litre. Given that factors influencing the choice of a particular alcohol beverage has
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little empirical evidence in Kenya, this study will investigate the factors that determine the
consumer’s choice of different alcohol beverage and provide the information to the
government . For the government to be able to curb the negative effects of alcohol
consumption, it should first of all understand the factors that affect an individual when it
comes to a decision of taking alcohol. For policies such as taxation and legislation to work,
understanding the individual characteristics of individuals will help the government regulate
factors such as accessibility and alcohol content.
Regardless of the negative effects of alcohol, there exist positive effects if moderate
drinking is adopted. One of the strongest medical evidence that exists for moderate drinking
is reduced risk of heart disease(Harvard School of Public Health, 2014). The focus of this
study is to investigate the factors that affect a drinker’s decision to consume a particular
alcohol beverage over the other. Notwithstanding the positive or negative effects of alcohol,
the study will explore why despite the negative effects of some brands of alcohol, some
consumers still engage in the consumption of such drinks.
1.3 Research Questions
Many studies have been conducted to assess the social and economic impact of
alcohol consumption. However, much focus has been on the causes of alcohol assumption
without much in depth into the various types of alcohol beverages, and what factors trigger
individuals to demand one particular type of alcohol over the other. Therefore, it is evident
that despite the fact that there are many brands of alcohol to choose from, no particular
reason can be associated with the behavior of the consumers. In spite of some the alcohol
beverages having devastating effects on the human lives, some consumers continue
demanding them.
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In order to identify the reasons for the demand for particular alcohol beverages, this
study will be conducted in order to answer the following questions:
I.
What are the factors that influence the choice of the different alcohol
beverages?
II.
How do these factors affect the choice of consumers in consuming different
alcohol beverages in Kiambu County?
1.4 Research Objectives
The general objective is to establish the factors that determine the demand for the
choice of different types of alcohol beverages.
The specific objectives are
I.
Identify the factors that influence the choice of different alcohol beverages by consumers
in Kiambu County
II.
To examine the significance of the factors in determining choice of a particular alcohol
beverage.
1.5 Significance of the study
Given the fact that alcohol is price inelastic(Collis, Grayson, & Johal, 2010),
government actions of introducing price floors or heavy taxes do not seem to be working
since majority of Kenyans still consume illicit brews and spirits(NACADA, 2014). For the
government to be able to curb the negative effects of alcohol consumption, it should first of
all understand the factors that affect an individual when it comes to a decision of taking
alcohol. For the policies implemented to work, understanding the individual characteristics of
individuals will help the government regulate factors such as accessibility and alcohol
content.
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According to a survey conducted in 2012 by the National Authority for Campaign
against Alcohol and Drug Abuse (NACADA), Kenya experienced 300 deaths in different
counties from the month of January to May 2014 (NACADA 2014). According to the survey,
the people consumed illicit brew that had excess alcohol hence causing immediate deaths.
This report will offer insight on how the government can use other measures on how to
regulate alcohol consumption using various methods such as controlling alcohol content and
reducing accessibility of alcohol. Considering the deaths that occurred, it is evident that
legislation and taxation of the alcohol beverages is not working.
1.6 Scope and limitation of the study
The study scope will be limited to the determinants of the type of alcohol beverage
choice in Kiambu County. Information will be obtained from Kiambu County and the
Kiambu County residents will be the respondents. Main data will be collected by
questionnaires which will be given to alcohol drinkers.
1.7 Organization of the study
The study will be conducted in five chapters. They include chapter one which will
describe the background of the study problem, statement of the problem, research questions,
objectives, limitation and scope of the study together with the significance of the study.
Chapter 2 will cover the general and specific literature, followed by overview of literature
review. Chapter 3 will describe the study model, variables and methods of measurement.
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CHAPTER TWO. LITERATURE REVIEW
2.1 Introduction
The literature review will thoroughly look into the study of other researchers who
have embarked to do a study on this area. The paper will review the general literature first
and then secondly look into the specific literature.
2.2 General Literature
The demand for alcohol is influenced by a greater set of factors than many other
consumption goods. As well as price and income, alcohol consumption is influenced by
licensing restrictions, taxation, advertising restrictions, minimum age requirements, social
factors, peer group pressure, habit formation, underlying health concerns, location, sex, age,
religion, marital status, and so on. According to Gallet (2007), alcohol exhibits price
inelasticity which makes it very difficult to control in terms of pricing. The study identified
that despite alcohol having many brands, consumers still view other alcohol drinks as close
substitutes. Therefore, Gallet (2007) identified that alcohol consumption solely does not
depend on price but other factors such as availability, marital status, age and social factors.
According to Hausman et al., (1994) consumption of alcohol does not entirely rely on
price and income only, but the expectations and utility to be derived from the consumption.
Using the elasticity estimates to measure alcohol consumption, Hausman et al., (1994),
identified that alcohol consumers mostly preferred alcohols that had more alcohol percentage
irrespective of the prices attached to the alcohol drinks. In addition, the study investigated the
effect of differentiation on beer. One of the major findings was that consumers consumed
little or no alcohol in the event that they lacked the beer they consume. The study concluded
that differentiation on alcohol contributed to a large extent to the decision a consumer made
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regarding consuming a particular brand. However, the study did not consider the income of
the individual and the price of alcohol as factors determining the choice of alcohol intake.
Österberg (2011) endeavored to investigate whether variation on the prices of alcohol
had any influence on the total consumption. Besides taxing alcoholic beverages, there are
other measures affecting the economic availability of alcohol such as minimum prices for
alcoholic beverages or regulation of discount prices. The impact of changes in prices of
alcoholic beverages on alcohol consumption and related harm has been more extensively
studied by Österberg (2011)than any other potential alcohol policy measure. According to his
study, when other factors remain unchanged, an increase in alcohol prices generally leads to a
decrease in alcohol consumption, and a decrease in alcohol prices usually leads to an increase
in alcohol consumption. As a rule, the effect of a change in prices of a certain magnitude has
different effects on the consumption of different kinds of alcohol, for example, distilled
spirits, wines and beer. Therefore, according to his study, the effects of prices as measured
with price elasticities, differ in different time periods as well as with regard to different
categories of alcoholic beverage. These differences are related to the use values of alcoholic
beverages and consumers’ preferences as well as the actual uses of such beverages. Local
drinking habits should, therefore, be taken into account when alcohol policy measures that
affect the economic availability of alcohol are planned(Österberg, 2011).
In an effort to understand the factors that determine the demand for different alcohol
beverages, Andrienko & Nemtsov (2006), identified that collective process which serves to
facilitate contacts. Due to social interaction, the style of alcohol consumption is often
unified. As a result, the more people around drink, the more a given individual drinks.
Therefore, he identified that one of the major distinctions of alcohol is that it is a habit
forming good. Hence, demand for alcohol beverages is mostly stable and variations in
income and price have little or no effect on the demand for alcohol.
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Smith (1999) argues that alcohol being a normal good, individual demand for alcohol
of better quality increases with income. The study found that the level of income of an
individual affected to a large extent the type of alcohol drink consumed and the frequency of
drinking. In addition, easy access of the alcohol beverages was a key determinant in
investigating the factors affecting the consumption of alcohol. Although the study was
instrumental in identifying that income was a major determinant, it neglected to consider the
drinking habits, alcohol percentage of the alcohol drink and age of the drinker. Through the
study carried, it is evident that cheap alcohol is consumed by people who do not have much
money to buy alcohol with enhanced quality. Therefore, it is clear that people consume
alcohol with higher percentage so that they can get drunk quickly since they do not have
enough money to many bottles.
Korhonen (2004) sought to investigate the effect of taxes on alcohol. Genrally, it is
expected that high taxes on alcohol should increase the prices and deter consumption.
However, despite high taxes on alcohol, consumers still consumed the highly taxed alcohol
drinks(Korhonen, 2004). This study proved that taxes on alcohol had little or no effect on the
consumption of alcohol. Government intervention through mechanism such as price floors
did not have any effect according to the study since most of the consumers still consumed
their favorite drinks despite the increase in prices. Through the study it became clear that
demand for alcohol was attributed to expectation, alcohol percentage, easy access, addiction
and individual characteristics such as gender, environment(Korhonen, 2004).
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2.2 Specific Literature
Waweru, et al., (2011) carried out an analysis of the determinants of alcohol
consumption in Kenya. He found that the factors are as follows; peer pressure (desire to fit
in), local festivals and events, availability and ease of access, family problems, and general
culture of acceptance of alcohol as portrayed in the media, especially advertisements.
However, the study lacks to consider the impact of prices and income of the consumer. This
study concurred with other studies that studied the determinants of alcohol consumption and
mostly agrees that as much an individual possesses the ability to buy a drink and has
accessibility to it, individual characteristics play a key role(Waweru, Kamau, & Matogo,
2011). In addition, the choice of a particular alcohol beverage mostly lies with the individual
tastes and preferences.
Studies by NACADA (2002) and Adelekan (2006) concur that the most commonly
used substances among the rural and urban communities in Kenya are traditional alcohol
brews. Local brewing occurs extensively in poor families, and the availability of these brews
is enhanced by the easy availability of ingredients needed, such as, maize, sorghum, and
sugar. Although most traditional brews are illegal by the laws of Kenya, some locally brewed
beer is sold by individuals after obtaining the licenses to do so. In addition to local brews,
alcohol use includes western style types of alcoholic beverages produced and marketed
through breweries and distillers such as branded spirits, gins, and wines. This study proves
that income plays a major role when it comes to the choice of alcohol drink a consumer takes.
For instance, members from poor families consume alcohol brews while as the members from
rich families consume drinks such as wine and champagne.
NACADA (2010) recently explored the factors that can account for the alcohol use
across Kenyan districts. The study found that alcohol use was due to idleness in 76.4 percent
of individuals, peer pressure in 64.8 percent of participants, unemployment in 61.2 percent of
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their sample, and work related stress for 56.3 percent of respondents. In addition, NACADA
(2010) found that marital problems and poverty each explained 49percent of the alcohol
related reasons for alcohol use. Finally, parental problems were identified as a reason 28.2
percent of adults use alcohol, and 14.3percent use alcohol because of media influence. While
this study is important in understanding the demographics of those who consume alcohol, it
does not delve into the specific details of the factors that lead a consumer to consume a
particular drink over the other despite having the liberty to do so.
From an economic standpoint demand for alcohol can be studied as for ordinary
consumer good. On the first glance higher prices on alcohol after raised taxation on
production and distribution should lead to lower alcohol consumption due to lower available
income. But it is indubitably for many that it is accompanied by substitution of illegal
alcohol, in particular illicit brews in Kenya. Therefore, apart from income and prices, alcohol
consumption mostly depended on other factors. In addition, the choice to drink a particular
drink mostly depends on alcohol percentage, differentiation, individual characteristics,
genetic predisposition and environmental factors as shown in the diagram below.
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Figure 1: Determinants of Drinking
Source (International Center for Alcohol Policies (ICAP), 2010)
2.3. Overview of Literature
Many authors in both the general and specific literature have focused on price and
incomes as the only determinants of alcohol consumption. However, according to studies
carried out by other researchers, individual characteristics, environmental factors and genetic
predisposition play major roles in determining alcohol consumption. In addition, very few
studies have endeavored to investigate why drinkers consume particular drinks despite having
many brands in the market. Nevertheless, many of the authors tend to agree that price and
income are the major factors that influence a consumer’s decision to consume one drink over
the other.
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CHAPTER THREE: METHODOLOGY
3.1 Introduction
This section focuses on the research techniques that will be adopted and used for this
study with the aim of achieving the research objectives.
3.2 Research design
This research will employ the survey method in assessing the factors that determine
the demand of a particular choice of type of alcohol beverage in Kiambu County. Primary
data will be collected and regression analysis conducted where the choice of type of alcohol
beverage will be the dependent variable. SPSS as a statistical software will be used to carry
out the analysis.
3.3.Theoretical Framework
In this study, alcohol is assumed to be the consumer good. As a consumer good, many
people derive utility from the beverage, and hence people consume the drink for curative,
recreation and religious purposes. Alcohol assumption in this study is assumed to increase
human satisfaction. It is assumed that a drinker makes a decision to take a particular drink in
order to maximize expected utility. For purposes of this study, it will be assumed that the
drinker does not consume excessive alcohol, hence no adverse effects of taking alcohol. The
drinker has preference for various types of alcohol beverages. For this study, it is assumed
that the types of alcohol beverages available to the people of Kiambu County are: Wines &
Champagnes, beers, spirits, traditional liquor and chang’aa.
For purposes of understanding and arranging the beverages, all types of alcohol under
wines and champagnes will be classified as generation one alcohol, alcohol beverages under
beer will be classified as generation two, various types of spirits will be classified as
generation three alcohol while traditional liquor and chang’aa will be remain by their names.
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The demand for the different types of alcohol is based on the theory of utility. The 5
types of alcohol beverages are the choices available to the consumer. A consumer chooses an
alcohol beverage that offers the highest utility, where the utility of the consumer і depends on
the attributes of the alcohol drink j (Žij) and the attributes of the consumer i, (Xi). The utility
of the individual i, faced with making an isolated choice j drinks of the different types of
alcohol available can be given as
Uij = Uij (Xi, Žij Ʃij)……………………………………….3.1
Where i = 1…N
j = 1…J where J=5
The Uij is the expected utility of individual i using alternative alcohol beverages.
Ʃij is the error term.
If alcohol generation p is preferred to alcohol generation q, then utility derived from q is
smaller than utility derived from p (McFadden 1975).
Uip (Xi, Žip Ʃip) > Uiq (Xi, Žiq Ʃiq)……………………………3.2
The utility values are stochastic and the event that Uij (Xi, Žij Ʃij) holds, it will occur with
some probability, so that 3.2 can be transformed to:
Pip = Prob { Uip (Xi, Žip Ʃip)} > Uiq (Xi, Žiq Ʃiq)………………3.3
J= 1, 2, 3, 4, 5 and j =1,…p, q, r…J
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For j types of alcohol drinks where Pip is the probability of choosing p over q. It is
also possible to write the stochastic probability as Uip (Xi, Žip Ʃip) into non stochastic and
stochastic component as illustrated below.
Uip (Xi, Žij Ʃij) = V (Xi, Zij)
+
Ω (Xi, Zij)
Non-stochastic
(3.4)
Stochastic
Substituting 3.4 into 3.3 gives:
Pik = Prob [V (Xi, Ziq) - V (Xi, Zip) < η (Xi, Zip) – η (Xi, Ziq) ]
(3.5)
Can also be written as
Pik = Prob [η (Xi, Ziq) - η (Xi, Zip)
< V (Xi, Zip) - V (Xi, Ziq) ]
(3.6)
j = 1, …p, q,…J and J=5 where p ≠ q
Therefore,
Let θ (ti,…,tj) denote the cumulative joint distribution function of
[η (Xi, Zi1), η (Xi, Zi2), …, η (Xi, ZiJ)]
(3.7)
As McFadden (1975) illustrates, let the first derivation of cumulative joint distribution
function represent the Pth argument be θ and let Vj = V (Xij, Zij).
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Equation 3.6 becomes
Pip = ƪθ (t + Vp-V1, t + Vk – V2……………t + V k – V J) dt
(3.8)
Depending on the unknown parameters of the distribution of Vj the probabilities can
be obtained for any unspecified joint probability distribution such as normal. In the case of
five alcohol choices, the choice probability of the first alcohol beverage can be given from
(3.8) as:
Pip = ƪθ (t + V(Xi,Zi1) - V(Xi,Zi2)) dt
(3.9)
Alternatively, the probability Pip can obtained introducing the cumulative distribution
function for η (Xi, Zi1) – η (Xi, Zi2) as:
Pip = G (V(Xi,Zi1) - V(Xi,Zi2)
(3.10)
The V has the general of:
V(Xi,Zij) = W1(Xi,Zij) ß1 + W2 (Xi,Zij) ß2 +…+ WJ (Xi,Zij) ßJ
= W (Xi,Zij) ß
(3.11)
Where the WJ (Xi,Zij) are empirical functions with no unknown parameters and ~ IS a
vector of a vector of unknown parameters.
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The W1, W2,…WJ are transformations of both the individual and alcohol beverage
attributes. If the distribution of function G is linear over the range of V, the (3.10) and (3.11)
yields a linear probability model (McFadden, 1975).
Pik = (W(Xi,Zij) - W (Xi,Zij) ß = ß1X + ß2Z
(3.12)
Alternatively, the function G may be specified as an Ogive and the commonly used
cumulative distribution functions are normal, logistic and Cauchy. The logit distribution
for the different types of alcohol beverage case above yields the probability:
Pik = 1/ 1 + exp [βw (Xi, Zi2)- βw (Xi, Zi1)]
(3.13)
Using the inverse transformations of the logistic distribution, the model can specify as
binary logit probability model as:
Log [p1/1-p1] = β1 X + β2Z
(3.14)
Turning to the multi-choice case of five alcohol beverages, the logistic probability function of
choosing generation p to q can be expressed as (assuming Weibull distributed errors; see
McFadden, 1975, pp. 61-71):
Pip = exp (W (Xi, Zip)β/∑ exp (W (Xi, Zip)β,
Therefore, a multinomial logit model becomes
Log [p1p/1-pp1] = β1X + β2Z + έ.
Where
e is the disturbance term
X is a matrix of all individual attributes variables.
Z is a matrix of all attributes of the alcohol variables.
The consumer chooses the type of alcohol, which brings the maximum utility.
Where C= Plk/(1-Plk) is the choice of a particular alcohol beverage.
(3.15)
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A is the level of consumption of other beverages apart from alcohol.
The function is represented as:
U = U(C, A)
(3.16)
The consumer's utility maximization problem can be stated as:
Max U = U (C, A)
s.t.
P 1C+P 2A=Y
(3.17)
Where
PI is the price of a particular alcohol beverage
P2 is the price of the other related alcohol beverage drinks
Y is the income dedicated for beverages
A langrangian function is formed to solve the utility maximization problem. Its first
order conditions are solved to yield:
C = C (PI, P2, Y)
(3.18)
A = A (PI, P2, Y)
(3.19)
Hence, C is the demand for the choice of a particular alcohol beverage. The study
postulates a relationship between the choice of an alcohol beverage and the determinants. The
demand (C) is determined by consumer's attributes (XD and the attributes of the Alcohol
beverage (Zq),
Where
Xi are explanatory consumers variables.
i=1,2,··,n
Where
XI = is the income of the consumer
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X2= level of education (EL)
X3= Gender(S)
X4 = Age of the consumer (Ag)
X5 = Status symbols (Sq)
X6= Alcohol content
Z is the explanatory choice of the alcohol attributes.
Where ZI = price of the alcohol beverage
Z2 = price of other alcohol beverages.
Z3 = convenience (Cv).
The equation is given as
C= ʄ (Y, EL, S, Ag, Sq, Nt, Pu, Ol, PL P2 Cv)
(3.20)
3.4 Model Specification
The model to be adopted assumes that the consumer is aware of all the alternatives that
will provide him with the maximum utility. The utility of the consumer from the specific
alternatives depends on the nature and level of use of the chosen alcohol beverage and
characteristics of the consumer. It will be assumed that the utility of the consumer i from the
alternative j is as follows
Uij = Xijßj + €ij
Where ß j is a vector that includes Ki fixed parameters that need to be estimated and
Xij includes K-variables representing various characteristics of alternatives j and consumer i.
eij denoted a random error.
The study will use the following model;
The demand (C) is determined by consumer's attributes (XD and the attributes of the
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Alcohol beverage (Zq),
Where
Xi are explanatory consumers variables.
i=1,2,··,n
Where
XI = is the income of the consumer
X2= level of education (EL)
X3= Gender(S)
X4 = Age of the consumer (Ag)
X5 = Status symbols (Sq)
X6= Alcohol content
Z is the explanatory choice of the alcohol attributes.
Where ZI = price of the alcohol beverage
Z2 = price of other alcohol beverages.
Z3 = convenience (Cv).
The equation is given as
C= ʄ (Y, EL, S, Ag, Sq, Nt, Pu, Ol, PL P2 Cv)
(3.20)
The model will use regression analysis where the choice of type of alcohol beverage will
be the dependent variable. In addition the a specific dichotomous multinomial logit
regression model which, pertain to choices of the consumer of an alcohol beverage.
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3.5. Working Hypothesis
Null Hypothesis
I.
H01 : There exists no factors that influence the choice of different alcohol beverages
by consumers in Kiambu County
II.
H02: There exists no significance factors that determine the choice of a particular
alcohol beverage.
3.6 Definition and measurement of variables
Choice of type of alcohol beverage
This is the dependent variable. It is a measure of demand for the choice of alcohol
beverage measured by the probability that, a particular alcohol beverage is chosen. Five
dummies are introduced:
AT1= 1 if generation 1 is chosen, 0 otherwise. AT2= 1 if generation 2 is chosen, 0 otherwise.
CT3=1 if generation 3 is chosen, 0 otherwise CT4= 1 if traditional liquor is chosen, 0
otherwise. CTs=l if
Chang’aa, 0 otherwise.
Price of the alcohol beverage (PI)
It is the money charged per bottle of alcohol
Income of the individual (Y)
Is the total earnings of an individual. It is captured by gross pay of the individual.
Level of education (Ed
This is the highest level of formal education attained by the drinker.
Four categories of formal education are recognized: primary education, secondary
education, college education and university education. Four dummies are introduced:
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FL1= 1 if primary education, 0 otherwise;
FL2=1if secondary education, 0 otherwise;
FL3=1 if college, 0 otherwise and
FL4=1 if university, zero otherwise.
Convenience (Cv)
This is the quality of being useful, easy or suitable to an existing situation.
It will be captured by use of a dummy which is equal to 1 if convenience, Zero otherwise.
Age of the drinker (Ag)
Measured in number of years from date of birth
Gender (S)
Captured by a dummy variable that takes the value 1 if male or 0 otherwise
Status symbol (Sq)
This refers to the position an individual is assumed or seen to have acquired in terms of
wealth and social status. A dummy variable is used where the value 1 if the type of alcohol
gives a particular class and 0 otherwise.
Alcohol content
This refers to the alcohol percentage in the alcohol beverage. The alcohol content was
measured in terms of percentages. Four dummies are introduced to capture the data.
A1 = 0-10 Percent
A2 = 10-30 percent
A3 = 30-50 percent
A4 = 50 and above percent
3.7. Study Area
The study area is Kiambu County. Kiambu County is a county in the former Central
Province of Kenya. Its capital is Kiambu and its largest town is Thika. The county is adjacent
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to the northern border of Nairobi County and has a population of 1,623,282. The county is
predominantly rural, but its urban population is increasing as Nairobi is growing rapidly.
Kikuyu are the dominant tribe in the county. In 2007, Kiambu District was subdivided in two:
Kiambu East and Kiambu West. Kiambu West district took Limuru, Lari and Kikuyu
divisions, with Limuru as its district capital.
3.8 Sampling techniques and sample size
Kiambu County has 7 constituencies and 20 electoral wards. Random sampling will
used to select 3 constituencies out of the 7. Multistage sampling procedure will be conducted
to select 2 electoral wards in each of the constituency. The electoral wards will be
purposively selected in order to fall under areas where there are business centres and have
access to restaurants, clubs and joints where alcohol is sold. Random respondents who take
alcohol will be selected in order to get valid and conclusive information. A sample size of
100 will be chosen.
3.9. Target Population
Kiambu County will be focused in this study. The county is adjacent to the northern
border of Nairobi County and has a population of 1,623,282. Kiambu County has 7
constituencies and 20 electoral wards.
3.10. Data type and source
The research problem is developed from primary data. The research will utilize
random and cluster sampling to obtain data.
3.11 Data Collection
A sample size of 100 will be chosen. Random sampling will used to select 3
constituencies out of the 7. Cluster sampling procedure will be conducted to select 2 electoral
wards in each of the constituency. The electoral wards will be purposively selected in order to
32
fall under areas where there are business centres and have access to restaurants, clubs and
joints where alcohol is sold. Random respondents who take alcohol will be selected in order
to get valid and conclusive information.
3.12 Ethical Issues
Permission will be borrowed from the respondents before engaging them to answer
the questionnaire. In addition, permission will be sought from the club owners, restaurant
owners and joints owners who would otherwise would not allow the study since we will be
interfering with their businesses.
3.1.3 Data Analysis
Primary data will be collected and regression analysis conducted where the choice of
type of alcohol beverage will be the dependent variable. The independent variables will be
the income, price, taxes, alcohol content and age. The individual characteristics will help in
understanding the demand for particular types of drinks. Choice of type of alcohol beverage
will be the dependent variable and will be regressed against income, price, taxes, alcohol
content and age as the independent variables. SPSS as a statistical software will be used to
carry out the analysis.
33
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