Demand For E-Cigarettes Based On Nicotine Strength: Evidence From Retail Sales

Using NielsenIQ Retail Scanner data, we estimate demand equations for e-cigarettes by nicotine concentration. Overall, the models show that the price elasticities of demand range from -2.117 to -1.494. In a rapidly evolving e-cigarette market, demand for e-cigarettes varies considerably by nicotine strength. High-nicotine products, which have many close substitutes, are found to be more responsive to changes in price. Demand for low-nicotine products, with few close substitutes, are found to be less responsive to changes in price. Our findings also suggest that e-cigarettes with the lowest and highest nicotine concentrations may be economic complements, suggesting concurrent use. Unlike available evidence on cross-tax elasticities of demand, we find no evidence of an economic relationship between traditional cigarettes and e-cigarettes when broken down by nicotine strength concentration.