Structural change in cigarette demand: cusum tests using panel data

We conduct cusum tests of structural change in a rational addiction model of cigarette demand estimated using a panel of annual time series of state-level data. In contrast to the one previous application of cusum tests to the question of cigarette demand stability, our results provide strong evidence of downward shifts in demand during the modern era of health warnings and anti-smoking campaigns.

The impact of addiction information on cigarette consumption

Although cigarette manufacturers were aware of the addictive properties of nicotine as early as 1962, the information did not become available to the general public until 1979 when it was disclosed by the Surgeon General. This set of events presents an opportunity to test the impact of addiction information on the demand for an addictive good. This study posits that the release of addiction information serves to make consumers aware of the implications of current consumption levels for future choices. In the absence of addiction information about a good, consumers have to rely on their past consumption experience of the addictive good. This study posits that in the absence of addiction information, the demand for an addictive good will be myopic and that after the release of addiction information the demand for the addictive good will be rational. The model constructed in this paper empirically modifies the rational addiction model to allow for the possibility of structural changes in the demand function which may have occurred beginning in 1979 due to the release of addiction information. It reconciles the competing models of myopia and rationality by accounting for the availability of addiction information to consumers. In addition to this, the theoretical model generalizes the rational addiction model to include non-addictive goods. This innovation nests the demand for both addictive and non-addictive goods as sub cases of a single demand equation. The subsequent rational addiction demand equation that is derived from this model retains the ability to distinguish between rational and myopic behavior;The model is tested using annual state disaggregated data for the U.S. from 1955-1994. The results support the theoretical prediction of a switch from a myopic to a rational regime after the release of addiction information. The impacts of price and past consumption on current consumption decline in the post-information period

The Impact of Addiction Information On Cigarette Consumption

Although per capita cigarette consumption in,the U.S. increased rapidly;until about \u27 1960, the last four, decades have experienced a, steady-decline in smoking. of this decline has been attributed to the increasing evidence of health hazards associated with smoking. As early as 1953, the American Cancer Society and the,British Medical,Research Council reported.that smoking caused increased mortality rates. By 1964, the Surgeon General had linked smoking to cancer. In the ensuing 15 ye^s, health warnings were \u27 required to be printed on cigarette packs, and tobacco advertising was limited and eventually banned from broadcast media. ,\u27 Although major tobacco firms. Iqiew that cigarettes were • addictive by the early 1960s, theydid not release this information to .the public (Glantz, et al. 1995). It was not until 1979 that the Surgeon-.General conclusively stated that^igarettes were addictive. 3y-1986 the Surgeon General reported that cigarette smoking-was the leading preventable cause of premature death and disability in the U.S; During this same time frame, increasing excise taxes\u27were working in combination with the health warmngs to .diminish aggregate smoking level

Profit Maximization In The National Football League

This paper investigates if NFL teams maximize profits with respect to ticket price.  We modify Ferguson et al’s (1991) NHL paper as it pertains to the NFL.  A profit function incorporating variable revenue and cost factors such as gate receipts and player expenses is employed.  A systems model is used as the estimation procedure to identify the determinants of ticket prices for NFL franchises.  The model implies a Kuhn-Tucker based cross equation parameter restriction that result from attendance capacity constraints.  Results from the regression are then used in conjunction with other data to numerically test the first order necessary profit maximization conditions.  The results indicate that over 80% of NFL teams set ticket prices in a manner consistent with gate receipt and profit maximization

The Demand For NFL Attendance: A Rational Addiction Model

This paper examines the demand for attendance at National Football League (NFL) games using a rational addiction model to test the hypothesis that professional football displays the properties of a habit-forming good.  Rational addiction theory suggests that past and future consumption play a part in determining the current period’s consumption for habit-forming goods.  Additionally, we postulate the behavioral implications of profit-maximizing ticket pricing behavior by NFL teams.  Previous studies have been unable to detect pricing power by NFL teams.  Our model of pricing power allows us to identify theoretically- anticipated pricing behavior.  A pooled data set is collected using statistics from each NFL team from the 1983 to the 2008 seasons.  Current attendance is modeled as a function of team specific variables, including past and future attendance, ticket price, and team performance.  The model is estimated using Two-Stage Least Squares (2SLS).  We also treat the censored nature of ticket demand as NFL teams frequently experience sell-outs.  It is found that past and future attendance, winning percentage, the age of the stadium in which a team plays, and own-price demand elasticity influence attendance.  The fact that coefficients for past and future attendance are positive and significant in this analysis lends support to the notion that NFL fans display characteristics of rational addiction in their consumption behavior.  Further, we find evidence to support profit-maximizing behavior in ticket sales

The impact of addiction information on cigarette consumption

Although cigarette manufacturers were aware of the addictive properties of nicotine as early as 1962, the information did not become available to the general public until 1979 when it was disclosed by the Surgeon General. This set of events presents an opportunity to test the impact of addiction information on the demand for an addictive good. This study posits that the release of addiction information serves to make consumers aware of the implications of current consumption levels for future choices. In the absence of addiction information about a good, consumers have to rely on their past consumption experience of the addictive good. This study posits that in the absence of addiction information, the demand for an addictive good will be myopic and that after the release of addiction information the demand for the addictive good will be rational. The model constructed in this paper empirically modifies the rational addiction model to allow for the possibility of structural changes in the demand function which may have occurred beginning in 1979 due to the release of addiction information. It reconciles the competing models of myopia and rationality by accounting for the availability of addiction information to consumers. In addition to this, the theoretical model generalizes the rational addiction model to include non-addictive goods. This innovation nests the demand for both addictive and non-addictive goods as sub cases of a single demand equation. The subsequent rational addiction demand equation that is derived from this model retains the ability to distinguish between rational and myopic behavior;The model is tested using annual state disaggregated data for the U.S. from 1955-1994. The results support the theoretical prediction of a switch from a myopic to a rational regime after the release of addiction information. The impacts of price and past consumption on current consumption decline in the post-information period.</p

The Impact of Addiction Information On Cigarette Consumption

Although per capita cigarette consumption in,the U.S. increased rapidly;until about ' 1960, the last four, decades have experienced a, steady-decline in smoking. of this decline has been attributed to the increasing evidence of health hazards associated with smoking. As early as 1953, the American Cancer Society and the,British Medical,Research Council reported.that smoking caused increased mortality rates. By 1964, the Surgeon General had linked smoking to cancer. In the ensuing 15 ye^s, health warnings were ' required to be printed on cigarette packs, and tobacco advertising was limited and eventually banned from broadcast media. ,' Although major tobacco firms. Iqiew that cigarettes were • addictive by the early 1960s, theydid not release this information to .the public (Glantz, et al. 1995). It was not until 1979 that the Surgeon-.General conclusively stated that^igarettes were addictive. 3y-1986 the Surgeon General reported that cigarette smoking-was the leading preventable cause of premature death and disability in the U.S; During this same time frame, increasing excise taxes'were working in combination with the health warmngs to .diminish aggregate smoking levels</p

Cigarettes and addiction information: simulating the demand effects of the tobacco industry's 'conspiracy of silence'

Although cigarette manufacturers were aware of the addictive properties of nicotine as early as 1962, the information did not become available to the US public until 1979 when the Surgeon General disclosed it (US Department of Health, Education, and Welfare, 1979). This study simulates the impact this information would have had on the demand for cigarettes had it been released in 1962. The simulations build on past work by Fenn et al. (2001) who found evidence that the release of addiction information resulted in a structural shift in demand in 1979. In the present study, the econometric results from Fenn et al. (2001) are used to compute simulated time paths for state-level per capita consumption under the hypothetical scenario involving the earlier release of the addiction information. Using these simulated consumption paths; the projected reductions in cigarette sales revenue are calculated. These dollar figures provide a benchmark against which to judge the compensation amounts that the industry must pay because of recent tobacco lawsuit settlements.

THE IMPACT OF ADDICTION INFORMATION ON CIGARETTE CONSUMPTION

Although cigarette producers knew that nicotine was addictive in the early 1960's, this information was not publicly known until the 1979 Surgeon General's Report. This study finds that the release of addiction information caused a structural shift in cigarette demand and estimates the value of the information using consumer surplus measures