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Price Elasticity of the Demand for Cigarettes in the United States
Author(s) -
Lyon Herbert L.,
Simon Julian L.
Publication year - 1968
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1237626
Subject(s) - elasticity (physics) , price elasticity of demand , econometrics , economics , wealth elasticity of demand , price elasticity of supply , cross elasticity of demand , microeconomics , physics , thermodynamics
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.