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by John A. Tauras Frank Chaloupka National
Bureau of Economic Research, Inc. This paper is the first
econometric study to examine the determinants of nicotine replacement
therapy (NRT) demand. Pooled cross-sectional time-series scanner-based
data for 50 major metropolitan markets in the United States covering the
period between the second quarter 1996 and the third quarter 1999 are
used in the analysis. Fixed-effects modeling is employed to assess the
impact of NRT prices, cigarette prices, and other determinants on NRT
demand. The estimates indicate that decreases in the price of NRT and
increases in the price of cigarettes would lead to substantial increases
in per-capita sales of NRT products. The average own-price elasticity
of demand for Nicoderm CQ, Nicorette, and Nicotrol is -1.4, -1.5, and
-1.1 respectively. The average cross-price elasticity of demand for Nicoderm
CQ and Nicorette is 0.68 and 0.81 respectively.
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