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Tobacco industry price-subsidizing promotions may overcome the downward pressure of higher prices on initiation of regular smoking

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Author Info
John P. Pierce (University of California, San Diego, La Jolla, USA)
Todd P. Gilmer (University of California, San Diego, La Jolla, USA)
Lora Lee (University of California, San Diego, La Jolla, USA)
Elizabeth A. Gilpin (University of California, San Diego, La Jolla, USA)
Joy de Beyer (University of California, San Diego, La Jolla, USA)
Karen Messer (University of California, San Diego, La Jolla, USA)
Abstract

Real cigarette prices in the US increased from the early 1980s to early 1990s. Holding all else equal, adolescent initiation of regular smoking should have declined during this period. Using national population-based surveys (n = 336 343) conducted in the 1990s, we present trends (early 1960s to mid-1990s) in the initiation of regular smoking among 14-17-year-old adolescents and 18-21-year-old young adults. We also present trends in consumer-price-index-adjusted cigarette price and tobacco-industry expenditures for price-subsidizing promotions. We relate price and price-subsidizing tobacco industry expenditures to trends in initiation in the two age groups, using autoregressive integrated moving average models (ARIMA). From the model results, we conclude that price-subsidizing promotions may provide the tobacco industry with an effective way to segment the market. That is, they effectively offer lower prices to population subgroups that are more price-sensitive (e.g. young smokers not yet addicted), countering the depressing effect of general price increases on smoking. Thus, we find that the relationship of cigarette price to smoking behavior is more complex than previously described. Copyright © 2005 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.990
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Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 14 (2005)
Issue (Month): 10 ()
Pages: 1061-1071
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Handle: RePEc:wly:hlthec:v:14:y:2005:i:10:p:1061-1071

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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  1. Emery, Sherry & White, Martha M. & Pierce, John P., 2001. "Does cigarette price influence adolescent experimentation?," Journal of Health Economics, Elsevier, vol. 20(2), pages 261-270, March. [Downloadable!] (restricted)
  2. Lewit, Eugene M & Coate, Douglas & Grossman, Michael, 1981. "The Effects of Government Regulation on Teenage Smoking," Journal of Law & Economics, University of Chicago Press, vol. 24(3), pages 545-69, December.
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  3. Douglas, Stratford, 1998. "The Duration of the Smoking Habit," Economic Inquiry, Oxford University Press, vol. 36(1), pages 49-64, January.
  4. John A. Tauras & Patrick M. O'Malley & Lloyd D. Johnston, 2001. "Effects of Price and Access Laws on Teenage Smoking Initiation: A National Longitudinal Analysis," NBER Working Papers 8331, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Jonathan Gruber, 2000. "Youth Smoking in the U.S.: Prices and Policies," NBER Working Papers 7506, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Philip DeCicca & Donald Kenkel & Alan Mathios, 2002. "Putting Out the Fires: Will Higher Taxes Reduce the Onset of Youth Smoking?," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 144-169, February. [Downloadable!] (restricted)
  7. Frank J. Chaloupka & Michael Grossman, 1996. "Price, Tobacco Control Policies and Youth Smoking," NBER Working Papers 5740, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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