We use double-hurdle or Cragg models to test whether decisions about smoking participation and consumption levels are separate, endogenous choices. We also estimate several dominance models which assume that standard comer solutions are not applicable. A complete dominance model with independence between the participation and consumption decisions is the preferred specification for our data. The most important variables influencing participation are region, number of children, education, and ethnicity. Region, age, race, ethnicity, and health status most affected consumption levels.

Demand models which are alternatives to the widely used Tobit model are specified and estimated. These alternative models allow the consumer to choose whether or not to participate in a particular market, and if so, to choose the level of consumption. This approach is contrasted to the Tobit model which assumes all consumers are potential users of a good and that consumption levels and market participation are influenced by the same variables in the same way.

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