Re-examining the price sensitivity of demand for cigarettes with quantile regression

• Estimate price sensitivity of smokers with different levels of tobacco consumption.
• Apply two-stage Heckman model with quantile regression model to study price effects.
• Results indicate price sensitivity is positively related to cigarette consumption.
• We predict a notable decrease of smoking for heavy smokers if price increases.

Existing studies suggest that teenagers, young adults, and individuals of low socioeconomic status are more sensitive to changes in cigarette prices. However, little is known as to whether there are differences in price sensitivity between heavy and light smokers. To examine this gap, the present study uses quantile regression to estimate price sensitivity of demand for smokers with different levels of tobacco consumption. We conducted a national personal interview survey in Taiwan and the results showed price sensitivity is positively associated with the level of cigarette consumption. The data indicate that pricing strategies are more likely to notably reduce cigarette consumption for heavy smokers. Our findings suggest policymakers can meet target control for cigarette consumption by effectively adjusting market prices of cigarettes.