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A Dynamic Analysis of the U.S. Cigarette Market and Antismoking Policies

In: Structural Econometric Models

Author

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  • Wei Tan

Abstract

A dynamic oligopoly model of the cigarette industry is developed to study the responses of firms to various antismoking policies and to estimate the implications for the policy efficacy. The structural parameters are estimated using a combination of micro and macro level data and firms’ optimal price and advertising strategies are solved as a Markov Perfect Nash Equilibrium. The simulation results show that tobacco tax increase reduces both the overall smoking rate and the youth smoking rate, while advertising restrictions may increase the youth smoking rate. Firm’s responses strengthen the impact of antismoking policies in the short run.

Suggested Citation

  • Wei Tan, 2013. "A Dynamic Analysis of the U.S. Cigarette Market and Antismoking Policies," Advances in Econometrics, in: Structural Econometric Models, volume 31, pages 387-432, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:aecozz:s0731-9053(2013)0000032012
    DOI: 10.1108/S0731-9053(2013)0000032012
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    More about this item

    Keywords

    Dynamic oligopoly; cigarette market; antismoking policies; L1;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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