Electronic cigarettes are a less harmful alternative to combustible cigarettes. We analyze data on e-cigarette choices in an online experimental market. Our data and mixed logit model capture two sources of consumer optimization errors: overestimates of the relative risks of e-cigarettes and present bias. Our novel data and policy analysis make three contributions. First, our predictions about e-cigarette use under counterfactual policy scenarios provide new information about current regulatory tradeoffs. Second, we provide empirical evidence about the role consumer optimization errors play in tobacco product choices. Third, we contribute to behavioral welfare analysis of policies that address individual optimization errors. Compared with standard cost-benefit analysis, our behavioral welfare economics analysis leads to much larger estimates of the costs of policies that discourage e-cigarette use or the benefits of policies that encourage e-cigarette use. K E Y W O R D S behavioral welfare analysis, consumer optimization, electronic cigarettes, electronic nicotine delivery systems, tobacco control 1 | INTRODUCTION Electronic cigarettes and other vaping devices provide users with a vapor that contains nicotine without the combustion-generated toxicants in tobacco smoke. Vaping e-cigarettes is not harmless but poses much lower risks than smoking combustible tobacco. 1 The vaping market has rapidly evolved. The first modern vaping products were introduced in U.S. markets around 2007. Annual sales grew rapidly from $500 million in 2012 to $6.6 billion in 2018 (Cowen and Company Equity Research, 2019). In 2018 data for adults, 9.7% of current smokers, 25.2% of recent (past-year) former smokers, and 4.2% of nonrecent former smokers regularly vape, compared with 1.1% of never smokers. 2 The adult current smoking rate was 19.8% in 2007 when e-cigarettes were introduced into the U.S. market and has declined to 13.7% in 2018 (American Lung Association, 2020; Creamer et al., 2019). Public policy towards vaping is also evolving. Vaping products were regulated as ordinary consumer products until 2016. In May 2016, the FDA issued a rule phasing in regulation of vaping products as tobacco products (FDA, 2016). In early 2020, the FDA announced new enforcement priorities that amount to at least a temporary ban of cartridge-based flavored e-cigarettes (other than menthol) (FDA, 2020a). In addition to the FDA, states, counties, and municipalities 1 Section 2 below provides more discussion of the evidence on the relative risks of vaping and smoking. Unless otherwise stated, we refer to the action of using e-cigarette products as vaping and the action of using any combustible tobacco product as smoking.