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Tobacco Regulation through Litigation: The Master Settlement Agreement

In: Regulation vs. Litigation: Perspectives from Economics and Law

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  • W. Kip Viscusi
  • Joni Hersch

Abstract

The 1998 Master Settlement Agreement resolved the unprecedented litigation in which the states sought to recoup the cigarette-related Medicaid costs. The litigation was settled through a combination of negotiated regulatory requirements and financial payments of about $250 billion over 25 years. Settlement payments received by states are strongly related to smoking-related medical costs but are also related to political factors. The payments largely took the form of an excise tax equivalent, raising potential antitrust concerns. The regulatory restrictions imposed by the agreement also raised antitrust concerns. However, there has been no evident shift in industry concentration. The increase in advertising and marketing expenses has largely taken the form of price discounts. The settlement sidestepped the usual procedures pertaining to the imposition of taxes and the promulgation of new regulations.
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Suggested Citation

  • W. Kip Viscusi & Joni Hersch, 2010. "Tobacco Regulation through Litigation: The Master Settlement Agreement," NBER Chapters, in: Regulation vs. Litigation: Perspectives from Economics and Law, pages 71-101, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:11959
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    References listed on IDEAS

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    1. David M. Cutler & Jonathan Gruber & Raymond S. Hartman & Mary Beth Landrum & Joseph P. Newhouse & Meredith B. Rosenthal, 2002. "The Economic impacts of the tobacco settlement," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 21(1), pages 1-19.
    2. Hersch, Joni, 2000. "Gender, Income Levels, and the Demand for Cigarettes," Journal of Risk and Uncertainty, Springer, vol. 21(2-3), pages 263-282, November.
    3. Joni Hersch & Alison F. Del Rossi & W. Kip Viscusi, 2004. "Voter Preferences and State Regulation of Smoking," Economic Inquiry, Western Economic Association International, vol. 42(3), pages 455-468, July.
    4. W. Kip Viscusi, 1995. "Cigarette Taxation and the Social Consequences of Smoking," NBER Chapters, in: Tax Policy and the Economy, Volume 9, pages 51-102, National Bureau of Economic Research, Inc.
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    12. Michael L. Marlow, 2007. "Do Tobacco-Control Programs Lower Tobacco Consumption?," Public Finance Review, , vol. 35(6), pages 689-709, November.
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    2. Goel, Rajeev K., 2014. "Economic stress and cigarette smoking: Evidence from the United States," Economic Modelling, Elsevier, vol. 40(C), pages 284-289.
    3. Yi-Chi Chen & Chang-Ching Lin, 2012. "Information shocks and cigarette addiction: views from dynamic panels with common structural changes," Applied Economics, Taylor & Francis Journals, vol. 44(35), pages 4651-4660, December.
    4. Rajeev Goel & Michael Nelson, 2012. "Cigarette demand and effectiveness of U.S. smoking control policies: state-level evidence for more than half a century," Empirical Economics, Springer, vol. 42(3), pages 1079-1095, June.

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    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K0 - Law and Economics - - General
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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