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Brand switching or reduced consumption? A study of how cigarette taxes affect tobacco consumption

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Abstract

We examined the influence of cigarette taxes on tobacco consumption, with an emphasis on smokers’ choice between reducing cigarette consumption and switching brands. We constructed three scenario-based models to study the following two subjects: (1) the relationship between deciding whether to reduce one’s cigarette consumption and to practice brand switching (simultaneous or sequential); (2) the key determinants that affect smokers’ decisions in terms of their consumption and brand switching when facing higher taxes. We applied data collected from a survey in Taiwan, and the results indicated that both independent and two-stage decision-making models generated very similar conclusions. We also found that gender difference contributed to reduce cigarette consumption. In addition, this study indicated that high-income smokers were less likely to switch brands, whereas well-educated smokers were more likely to switch brands. Most importantly, we questioned the effectiveness of cigarette tax policy, as our results suggested that higher price did not necessarily reduce consumption. Indeed, data indicated that <24 % of smokers actually reduced their cigarette consumption after the tax on cigarettes increased.

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Notes

  1. We appreciate referees’ suggestions to include this scenario.

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Acknowledgments

We appreciate reviewers’ great comments and suggestions.

Conflict of interest

All authors declare that they have no conflicts of interest.

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Authors and Affiliations

  1. Department of Economics, National Chi-Nan University, 1 University Rd., Puli, Nantou Hsien, 545, Taiwan, ROC

    Chiang-Ming Chen

  2. Department of Economics, South Dakota State University, Box 504, Scobey Hall Room 109, Brookings, SD, USA

    Kuo-Liang Chang

  3. Department of Banking and Finance, National Chi-Nan University, 1 University Rd., Puli, Nantou Hsien, 545, Taiwan, ROC

    Lin Lin

  4. Department of Senior Citizen Service Management, National Taichung University of Science and Technology, Taichung, Taiwan, ROC

    Jwo-Leun Lee

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  1. Chiang-Ming Chen
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  2. Kuo-Liang Chang
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Correspondence to Jwo-Leun Lee.

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Chen, CM., Chang, KL., Lin, L. et al. Brand switching or reduced consumption? A study of how cigarette taxes affect tobacco consumption. Eur J Health Econ 15, 991–998 (2014). https://doi.org/10.1007/s10198-013-0549-1

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  • DOI: https://doi.org/10.1007/s10198-013-0549-1

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