Title: Restaurant tax feasibility: determinants of restaurant threshold price

Authors: Georgette Owusu-Amankwah; Jason R. Swanson; James E. Allen IV; Junghee Han; Alison Davis

Addresses: Agricultural Economics, University of Kentucky, 414 Charles E. Barnhart Bldg., Lexington, KY 40546, USA ' Retailing and Tourism Management, University of Kentucky, 120 Erikson Hall, Lexington, KY 40506, USA ' Community and Economic Development Initiative of Kentucky, University of Kentucky, 414 Charles E. Barnhart Bldg., Lexington, KY 40546-0276, USA ' Daegu Convention and Visitors Bureau, 17, Yutongdanji-ro 14-gil, Buk-gu, Daegu 41515, Republic of Korea ' Agricultural Economics, University of Kentucky, 411 Charles E. Barnhart Bldg., Lexington, KY 40546, USA

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.

Keywords: restaurant tax; threshold prices; Tobit regression; food-away-from-home; consumer preferences; tourism policy; full-service restaurants; restaurant meals; meals cost increase; USA; United States; willingness to pay; meal prices; restaurant pricing.

DOI: 10.1504/IJHEM.2016.082166

International Journal of Hospitality and Event Management, 2016 Vol.1 No.4, pp.333 - 354

Received: 28 Mar 2016
Accepted: 12 Apr 2016

Published online: 09 Feb 2017 *

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