A Dynamic Analysis of the U.S. Cigarette Market and Antismoking Policies
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.
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Acknowledgements
Acknowledgments
I would like to thank Joseph E. Harrington, Jr. and Matthew Shum for their advice and encouragement. I also thank Robert Moffitt, Tiemen Woutersen, and seminar participants at Johns Hopkins University, North Carolina State University, University of Oklahoma, Arizona State University, Georgia State University, Rutgers, SUNY-Stony Brook, 2005 International Industrial Organization Society Conference, and 2006 Econometric Society Summer Meetings.
Citation
Tan, W. (2013), "A Dynamic Analysis of the U.S. Cigarette Market and Antismoking Policies", Structural Econometric Models (Advances in Econometrics, Vol. 31), Emerald Group Publishing Limited, Leeds, pp. 387-432. https://doi.org/10.1108/S0731-9053(2013)0000032012
Publisher
:Emerald Group Publishing Limited
Copyright © 2013 by Emerald Group Publishing Limited