A comprehensive examination of own- and cross-price elasticities of tobacco and nicotine replacement products in the U.S.

Abstract

While much is known about the demand for cigarettes, research on the demand for non-cigarette tobacco products and the cross-price impacts among those products is limited. This study aims to comprehensively examine the own- and cross-price elasticities of demand for tobacco and nicotine replacement products (NRPs) in the U.S. We analyzed market-level quarterly data on sales and prices of 15 different types of tobacco products and NRPs from 2007 to 2014, compiled from retail store scanner data. Fixed effects models with controls were used to estimate their own-price elasticities and cross-price elasticities between cigarettes and the other 14 products. Our results show that, except for cigars, the demand for combustible tobacco products was generally elastic, with the estimated own-price elasticity >1 (10% increase in prices reduces sales by >10%). The own-price elasticities for smokeless tobacco products were smaller than those for combustible tobacco, although not always significant. The demand for electronic cigarettes and NRPs was found to be elastic. The cross-price elasticities with respect to cigarettes were positive for cigarillos, little cigars, loose tobacco, pipe tobacco, electronic cigarettes and NRPs, but only results for little cigars, loose tobacco, pipe tobacco, and dissolvable lozenges were consistently significant. Our findings suggest demand for tobacco products and NRPs was responsive to changes in their own prices. Substitutions or positive cross-price impacts between cigarettes and certain other products exist. It is important that tobacco control policies take into account both own- and cross-price impacts among tobacco products and NRTs.

Impact of e-cigarette and cigarette prices on youth and young adult e-cigarette and cigarette behaviour: evidence from a national longitudinal cohort

“…To be clear, lack of a significant relationship between e-cigarette prices and past 30-day e-cigarette use does not necessarily mean there is no influence of e-cigarette price on e-cigarette use among youth and young adults given that our models primarily captured aspects of e-cigarette participation, not levels of consumption. Studies that have examined the impact of e-cigarette prices on overall consumption of e-cigarettes using retail sales data have clearly demonstrated that higher e-cigarette prices reduce the sales and consumption of e-cigarettes 3–7. We believe the lack of a relationship between e-cigarette prices and e-cigarette participation reflects the difficulties in properly identifying and estimating the impact of prices on youth e-cigarette use behaviours.…”

“…If the products are complements, or commonly used together, a price increase in one will lead to reduced use of both. Recent literature examining price and sales data at the market level in the USA and European Union has found that the price elasticities of demand for disposable and rechargeable e-cigarettes are generally more elastic than that for cigarettes,3–7 indicating that changes in e-cigarette prices will induce relatively larger changes in e-cigarette demand. Data on product substitution and complementarity have been mixed, with some studies finding that e-cigarettes are substitutes for cigarettes3 4 8–10 and others finding that the products are neither substitutes nor complements 5–7…”

The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data

“…The NRSD is used in two studies to study the effect of e-cigarette prices on e-cigarette and traditional cigarette sales. Huang et al (2018) use data from 2007 to 2014 to document ecigarette own-price elasticities for rechargeable e-cigarette sales of -1.4 and for disposable ecigarette sales of -1.5. Using data over the period 2009 to 2013 Zheng et al (2017) estimate an ecigarette own-price elasticity of demand of -2.1, a cross-price elasticity of traditional cigarette prices on e-cigarettes sales of 1.9, and a cross-price elasticity of e-cigarette prices on traditional cigarette sales of 0.004.…”

The Effects of Traditional Cigarette and E-Cigarette Taxes on Adult Tobacco Product Use

“…Three studies evaluate the effect of these e-cigarette prices on traditional cigarette and ecigarettes sales. Huang et al (2018) use data from 2007 to 2014 to estimate e-cigarette ownprice elasticities for rechargeable e-cigarettes of -1.4 and for disposable e-cigarettes of -1.6. Zheng et al (2017) use data from 2009 to 2013 and document an e-cigarette own-price elasticity of demand of -2.1, a cross-price elasticity of traditional cigarette prices on e-cigarettes sales of 1.9, and a cross-price elasticity of e-cigarette prices on traditional cigarette sales of 0.004.…”