We find that sin-good purchases are highly concentrated, with 10% of households paying more than 80% of taxes on alcohol and cigarettes. Total sin-tax burdens are poorly explained by demographics (including income) but are well explained by eight household clusters defined by purchasing patterns. The two most taxed clusters comprise 8% of households, pay 63% of sin taxes, and are older, less educated, and lower income. Taxes on sugary beverages broaden the tax base but add to the burdens of heavily taxed households. Efforts to increase sin taxes should consider the heavy burdens borne by few households.

In many industries, upstream manufacturers pay downstream retailers for achieving quantity or market share targets. These “vertical rebates” may mitigate downstream moral hazard by inducing greater retail effort but may also incentivize retailers to drop competing products. We study these offsetting effects empirically for a rebate paid to one retailer. Using a field experiment, we exogenously vary the outcome of retailer effort. We estimate models of consumer choice and retailer behavior to quantify the rebate’s effect on retail assortment and effort. We find that the rebate is designed to exclude a competing product and fails to maximize social surplus.