How Do Smokers Respond to Cigarette Taxes? Evidence from China's Cigarette Industry
利用2005-2010年中国品牌级卷烟销售数据，估计离散选择模型，发现品牌级需求价格弹性为-0.807，市场级为-0.488，税收导致消费者转向低价和高焦油卷烟，对政策制定有参考价值。
This paper examines how Chinese smokers respond to tax-driven cigarette price increases by estimating a discrete choice model of demand for differentiated products, using annual nationwide brand-level cigarette sales data in China from 2005 to 2010. We allow for substitution between different cigarette brands and also incorporate key features of rational addiction theory into the model. Results show that the average own-price elasticity of demand for cigarettes at the brand level is -0.807, and the overall price elasticity of cigarettes at the market level is -0.488 in China. We find tax-induced substitution toward low-price cigarettes as well as high-tar cigarettes and that tax hikes encourage within-class substitution more than across-class substitution. These results have important policy implications for the potential effects of cigarette taxation. Copyright © 2014 John Wiley & Sons, Ltd.