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Cigarettes and addiction information: simulating the demand effects of the tobacco industry's 'conspiracy of silence'

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  • Aju Fenn
  • John Schroeter

Abstract

Although cigarette manufacturers were aware of the addictive properties of nicotine as early as 1962, the information did not become available to the US public until 1979 when the Surgeon General disclosed it (US Department of Health, Education, and Welfare, 1979). This study simulates the impact this information would have had on the demand for cigarettes had it been released in 1962. The simulations build on past work by Fenn et al. (2001) who found evidence that the release of addiction information resulted in a structural shift in demand in 1979. In the present study, the econometric results from Fenn et al. (2001) are used to compute simulated time paths for state-level per capita consumption 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 because of recent tobacco lawsuit settlements.

Suggested Citation

  • Aju Fenn & John Schroeter, 2004. "Cigarettes and addiction information: simulating the demand effects of the tobacco industry's 'conspiracy of silence'," Applied Economics, Taylor & Francis Journals, vol. 36(19), pages 2151-2159.
  • Handle: RePEc:taf:applec:v:36:y:2004:i:19:p:2151-2159 DOI: 10.1080/0003684042000290138
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    1. 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 148-155, February.
    2. 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, Cambridge University Press, vol. 26(02), pages 535-544, December.
    3. 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.
    4. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1994. "An Empirical Analysis of Cigarette Addiction," American Economic Review, American Economic Association, vol. 84(3), pages 396-418, June.
    5. Gallet, Craig & Agarwal, Rajshree, 1999. "The Gradual Response of Cigarette Demand to Health Information," Bulletin of Economic Research, Wiley Blackwell, vol. 51(3), pages 259-265, July.
    6. Auld, M. Christopher & Grootendorst, Paul, 2004. "An empirical analysis of milk addiction," Journal of Health Economics, Elsevier, vol. 23(6), pages 1117-1133, November.
    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. Fenn, Aju J. & Antonovitz, Frances & Schroeter, John R., 2001. "Cigarettes and addiction information: new evidence in support of the rational addiction model," Economics Letters, Elsevier, vol. 72(1), pages 39-45, July.
    9. 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 449-454, October.
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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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