How Do Prices of Manufactured Cigarettes and Roll-Your-Own Tobacco Affect Demand for these Products? (Report)

This Report was written by the Institute of Economic Sciences (IES) in Serbia. The report discusses the impact of the price of manufactured cigarettes and roll-your-own-tobacco on the prevalence and the intensity of use of these products in six Southeastern European countries. IES models the overall demand elasticity, as well as the cross-price elasticity given that manufactured cigarettes and roll-your-own tobacco are potential substitutes. The researchers found that higher prices in both products are associated with lower use. Although smokers may switch from manufactured cigarettes to the less expensive roll-your-own-tobacco products, this can be discouraged by increasing the price of roll-your-own tobacco to match the price of manufactured cigarettes. This report provides an assessment of the impact of the price of two common tobacco products on demand.

A Policy Brief based on the report can be found here.