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Cigarettes and Addiction Information: Simulating the Demand Effects of the Tobacco Industry's 'Conspiracy of Silence'

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  • Fenn, Aju J.
  • Schroeter, John R.

Abstract

Although cigarette manufacturers were aware of the addictive properties of nicotine as early as 1962, the information did not become available to the U.S. public until 1979 when the Surgeon General disclosed it. This study simulates the impact that this information would have had on the demand for cigarettes had it been released in 1962. The simulations build on past work by Fenn, Antonovitz, and Schroeter (FAS) that found evidence that the release of addiction information resulted in a structural shift in demand in 1979. In the present paper, the econometric results from FAS are used to compute simulated time paths for state-level per capita consumtpion under the hypothetical scenario involving the earlier release of the addiction information. Using these simulated consumption paths, the projected reductions in cigarette sales revenue are calculated. These dollar figures provide a benchmark against which to judge the compensation amounts that the industry must pay as a result of recent tobacco lawsuit settlements.

Suggested Citation

  • Fenn, Aju J. & Schroeter, John R., 2004. "Cigarettes and Addiction Information: Simulating the Demand Effects of the Tobacco Industry's 'Conspiracy of Silence'," Staff General Research Papers Archive 12002, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:12002
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    References listed on IDEAS

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    1. Blaine, Thomas W. & Reed, Michael R., 1994. "U.S. Cigarette Smoking and Health Warnings: New Evidence From Post World War II Data," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(2), pages 535-544, December.
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    4. Fenn, Aju J. & Antonovitz, Frances & Schroeter, John R., 2001. "Cigarettes and addiction information: new evidence in support of the rational addiction model," Economics Letters, Elsevier, vol. 72(1), pages 39-45, July.
    5. Baltagi, Badi H & Griffin, James M, 2001. "The Econometrics of Rational Addiction: The Case of Cigarettes," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 449-454, October.
    6. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1994. "An Empirical Analysis of Cigarette Addiction," American Economic Review, American Economic Association, vol. 84(3), pages 396-418, June.
    7. Baltagi, Badi H & Levin, Dan, 1986. "Estimating Dynamic Demand for Cigarettes Using Panel Data: The Effects of Bootlegging, Taxation and Advertising Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 148-155, February.
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    Cited by:

    1. Moro, Daniele, 2008. "Market And Policy Issues In Micro-Econometric Demand Modeling," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6500, European Association of Agricultural Economists.

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