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Quantifying Brand Loyalty: Evidence from the Cigarette Market

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Listed:
  • Philip DeCicca
  • Donald S. Kenkel
  • Feng Liu
  • Jason Somerville

Abstract

We exploit a quasi-experiment created when New York State began in 2011 to tax cigarettes sold on Native American Reservations. The regime change represents a unique opportunity to quantify brand loyalty because it almost doubled the price of premium-brand cigarettes, while Native brands were still untaxed. We use data from two different sources—the New York State Adult Tobacco Survey and the Nielsen Homescan Panel. We find that the increase in relative prices led to substantial declines in premium cigarette purchases. However, even among the premium consumers with the most to gain from switching, about three-quarters remained brand loyal.

Suggested Citation

  • Philip DeCicca & Donald S. Kenkel & Feng Liu & Jason Somerville, 2021. "Quantifying Brand Loyalty: Evidence from the Cigarette Market," NBER Working Papers 28690, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28690
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    References listed on IDEAS

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    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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