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Tobacco industry price‐subsidizing promotions may overcome the downward pressure of higher prices on initiation of regular smoking

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  • John P. Pierce
  • Todd P. Gilmer
  • Lora Lee
  • Elizabeth A. Gilpin
  • Joy de Beyer
  • Karen Messer

Abstract

Real cigarette prices in the US increased from the early 1980s to early 1990s. Holding all else equal, adolescent initiation of regular smoking should have declined during this period. Using national population‐based surveys (n = 336 343) conducted in the 1990s, we present trends (early 1960s to mid‐1990s) in the initiation of regular smoking among 14–17‐year‐old adolescents and 18–21‐year‐old young adults. We also present trends in consumer‐price‐index‐adjusted cigarette price and tobacco‐industry expenditures for price‐subsidizing promotions. We relate price and price‐subsidizing tobacco industry expenditures to trends in initiation in the two age groups, using autoregressive integrated moving average models (ARIMA). From the model results, we conclude that price‐subsidizing promotions may provide the tobacco industry with an effective way to segment the market. That is, they effectively offer lower prices to population subgroups that are more price‐sensitive (e.g. young smokers not yet addicted), countering the depressing effect of general price increases on smoking. Thus, we find that the relationship of cigarette price to smoking behavior is more complex than previously described. Copyright © 2005 John Wiley & Sons, Ltd.

Suggested Citation

  • John P. Pierce & Todd P. Gilmer & Lora Lee & Elizabeth A. Gilpin & Joy de Beyer & Karen Messer, 2005. "Tobacco industry price‐subsidizing promotions may overcome the downward pressure of higher prices on initiation of regular smoking," Health Economics, John Wiley & Sons, Ltd., vol. 14(10), pages 1061-1071, October.
    • Handle: RePEc:wly:hlthec:v:14:y:2005:i:10:p:1061-1071
    DOI: 10.1002/hec.990
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    References listed on IDEAS

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