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Cigarettes and Addiction Information: Simulating the Demand Effects of the Tobacco Industry's 'Conspiracy of Silence'

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  • Fenn, Aju J.
  • Schroeter, John R.

Abstract

Although cigarette manufacturers were aware of the addictive properties of nicotine as early as 1962, the information did not become available to the U.S. public until 1979 when the Surgeon General disclosed it. This study simulates the impact that this information would have had on the demand for cigarettes had it been released in 1962. The simulations build on past work by Fenn, Antonovitz, and Schroeter (FAS) that found evidence that the release of addiction information resulted in a structural shift in demand in 1979. In the present paper, the econometric results from FAS are used to compute simulated time paths for state-level per capita consumtpion under the hypothetical scenario involving the earlier release of the addiction information. Using these simulated consumption paths, the projected reductions in cigarette sales revenue are calculated. These dollar figures provide a benchmark against which to judge the compensation amounts that the industry must pay as a result of recent tobacco lawsuit settlements.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12002.

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Date of creation: 01 Oct 2004
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Publication status: Published in Applied Economics, October 2004, vol. 36, pp. 2151-2160
Handle: RePEc:isu:genres:12002

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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References

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  1. Gary S. Becker & Michael Grossman & Kevin M. Murphy, 1990. "An Empirical Analysis of Cigarette Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 61, Chicago - Center for Study of Economy and State.
  2. Auld, M. Christopher & Grootendorst, Paul, 2004. "An empirical analysis of milk addiction," Journal of Health Economics, Elsevier, vol. 23(6), pages 1117-1133, November.
  3. Gallet, Craig & Agarwal, Rajshree, 1999. "The Gradual Response of Cigarette Demand to Health Information," Bulletin of Economic Research, Wiley Blackwell, vol. 51(3), pages 259-65, July.
  4. Baltagi, Badi H & Griffin, James M, 2001. "The Econometrics of Rational Addiction: The Case of Cigarettes," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 449-54, October.
  5. Baltagi, Badi H & Levin, Dan, 1986. "Estimating Dynamic Demand for Cigarettes Using Panel Data: The Effects of Bootlegging, Taxation and Advertising Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 148-55, February.
  6. Fenn, Aju J. & Antonovitz, Frances A. & Schroeter, John R., 2001. "Cigarettes and Addiction Information: New Evidence in Support of the Rational Addiction Model," Staff General Research Papers 5117, Iowa State University, Department of Economics.
  7. Barnett, Paul G. & Keeler, Theodore E. & Hu, Teh-wei, 1995. "Oligopoly structure and the incidence of cigarette excise taxes," Journal of Public Economics, Elsevier, vol. 57(3), pages 457-470, July.
  8. Blaine, Thomas W. & Reed, Michael R., 1994. "U.S. Cigarette Smoking And Health Warnings: New Evidence From Post World War Ii Data," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 26(02), December.
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Cited by:
  1. Moro, Daniele, 2008. "Market And Policy Issues In Micro-Econometric Demand Modeling," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6500, European Association of Agricultural Economists.

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