Price Elasticity of the Demand for Cigarettes in the United States

Herbert L. Lyon and Julian L. Simon

American Journal of Agricultural Economics, 1968, vol. 50, issue 4, 888-895

Abstract: The retail price elasticity of demand for cigarettes is a particularly important parameter for social decisions at this time. Results from prior cigarette elasticity studies vary widely, ranging from −0.10 to −1.48. Temporal changes may explain some of this variation, but differences in research methods are more important. The quasi-experimental approach used in this article yields an elasticity estimate (−0.511) free of many of the extraneous and irrelevant systematic influences that afflict time-series and cross-section methods. In addition, the length of run of the elasticity is known and explicit. The method provides built-in protections against bias from trends in collinear variables and produces sensible estimates with reasonably small and measurable dispersion.

Date: 1968
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