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Responses of Consumers to the Mandatory Disclosure of Information: Evidence from Natural Experiments in Japanese Inter-brand Cigarette Demands

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  • Junmin Wan

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    (Osaka School of International Public Policy, Osaka University)

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    Abstract

    I estimated inter-brand cigarette demands with nicotine, tar content and policy event information in Japan during 1950-84. The demand for all brands increased but the demand for plain (non-filter) brands decreased due to the dissemination ofgA Note about Health Damage from Smoking h in 1964. The demand for all brands increased but the demand for high-nicotine brands decreased due to the disclosure of nicotine and tar content in 1967 and the labeling warnings in 1972, however consumers had still preferred high-nicotine brands after 1972. Contrastively, the demand for high-tar brands increased in 1967 but decreased in 1972, and consumers had switched to prefer low-tar brands after 1972. Disclosure did not reduce the intake of nicotine but reduced the intake of tar, accordingly disclosure may benefit consumers by reducing the health risk as tar causes cancers. In line with changes in inter-brand demands, the monopolistic firm discontinued old products with poorer quality (plain, high-tar) but provided new better ones (filter-tipped, low-tar).

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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0413R.pdf
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    Bibliographic Info

    Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 04-13-Rev.

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    Length: 39 pages
    Date of creation: Jun 2004
    Date of revision: Feb 2006
    Handle: RePEc:osk:wpaper:0413r

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    Web page: http://www.econ.osaka-u.ac.jp/
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    Keywords: disclosure; nicotine; tar; cigarette; inter-brand; panel estimation; difference in difference;

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    1. David Neumark & Daiji Kawaguchi, 2001. "Attrition Bias in Economic Relationships Estimated with Matched CPS Files," NBER Working Papers 8663, National Bureau of Economic Research, Inc.
    2. Ginger Zhe Jin & Phillip Leslie, 2003. "The Effect Of Information On Product Quality: Evidence From Restaurant Hygiene Grade Cards," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(2), pages 409-451, May.
    3. Frank J. Chaloupka & Kenneth E. Warner, 1999. "The Economics of Smoking," NBER Working Papers 7047, National Bureau of Economic Research, Inc.
    4. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
    5. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1994. "An Empirical Analysis of Cigarette Addiction," American Economic Review, American Economic Association, American Economic Association, vol. 84(3), pages 396-418, June.
    6. Mathios, Alan D, 2000. "The Impact of Mandatory Disclosure Laws on Product Choices: An Analysis of the Salad Dressing Market," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 43(2), pages 651-77, October.
    7. Ippolito, Pauline M & Mathios, Alan D, 1995. "Information and Advertising: The Case of Fat Consumption in the United States," American Economic Review, American Economic Association, American Economic Association, vol. 85(2), pages 91-95, May.
    8. Michael J. Fishman & Kathleen M. Hagerty, 2003. "Mandatory Versus Voluntary Disclosure in Markets with Informed and Uninformed Customers," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 19(1), pages 45-63, April.
    9. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 24(3), pages 461-83, December.
    10. David Dranove & Daniel Kessler & Mark McClellan & Mark Satterthwaite, 2002. "Is More Information Better? The Effects of 'Report Cards' on Health Care Providers," NBER Working Papers 8697, National Bureau of Economic Research, Inc.
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