Price Elasticity and Alcohol Choice in Nairobi’s Informal Settlements
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Abstract
Alcohol pricing is a central determinant of drinking choices in Nairobi’s informal settlements, where illicit brews dominate consumption. This study surveyed 118 alcohol outlets and applied a multinomial logit model with controls for cost of living, outlet availability, and peer influence. Descriptive results show that respondents consumed on average 2.4 litters per visit; illicit alcohol accounted for 61% of total consumption. Empirical estimates reveal that a KES 10 increase in legal alcohol prices raised the probability of illicit alcohol choice by 8.7% (p < .01), while a KES 10 rise in illicit prices reduced consumption likelihood by 6.2% (p < .05). Peer influence and outlet density further amplified illicit substitution. These findings suggest that excise-driven price hikes, without strong enforcement and affordable alternatives, risk intensifying harmful illicit alcohol use.
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