This paper provides an econometric analysis of the effects of cigarette price and advertising changes stemming from the United States Tobacco Settlement of 1998. This is done by estimation of a demand function for cigarettes, based on data from both before and after the Settlement. The model is estimated using monthly time series data for the period 1990-2000. Results show that the increase in cigarette prices stemming from the Settlement reduced per capita cigarette consumption in the USA by 8.3%. However, the cigarette companies also increased advertising in the years immediately preceding and following the Settlement. This study estimates that this increased advertising partially offsets the effects of the higher prices, increasing cigarette consumption by 2.7 to 4.7%, and hence blunting the effects of the price increase by 33-57%.
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Document Type: Research Article
Department of Economics University of California Berkeley CA 94720-3880
School of Public Health University of California Berkeley CA 97420-7360
Center for Health Policy and Primary Care Outcomes Research Stanford University Stanford CA 94305-6019
Institute for Health and Aging University of California San Francisco CA
Publication date: 2004-01-01
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