Restaurant tax feasibility: determinants of restaurant threshold price Online publication date: Thu, 09-Feb-2017
by Georgette Owusu-Amankwah; Jason R. Swanson; James E. Allen
International Journal of Hospitality and Event Management (IJHEM), Vol. 1, No. 4, 2016
Abstract: This study examines the determinants of threshold price for restaurant meal cost increase. Threshold price is defined as the required level of cost increase that would cause households to eat in restaurants less frequently or decrease the amount they would typically purchase. The study uses Tobit models to examine the threshold price by differing social, economic and demographic characteristics of households in Kentucky. The empirical estimates suggest that households which have dinner at restaurants more frequently, households with higher incomes and households that strongly prefer full-service restaurants have a higher threshold price-range and are thus more willing to pay an additional cost increase in restaurant meals. Conversely, households that always notice taxes before paying their checks, households close to retirement-age, and households that do not strongly prefer local-food restaurants have a lower threshold price-range and are consequently less willing to pay an additional cost increase in restaurant meals.
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