Who Pays Cigarette Taxes? The Impact of Consumer Price Search
We conduct an empirical study of the impact of consumer price-search on the shifting of cigarette excise taxes to consumer prices. We use novel data on the prices smokers report actually paying for cigarettes. We document substantial price dispersion. We find that cigarette taxes are shifted at lower rates to the prices paid by consumers who undertake more price search - carton buyers, and especially, smokers who buy cartons of cigarettes in a state other than their state of residence. We also find suggestive evidence that taxes are shifted at slightly higher rates to the prices paid by non-daily smokers, less addicted smokers, and smokers of light cigarettes.
This research was supported by Award # R01 HD048828 from the National Institutes of Health. We thank Michael Baye for helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Philip DeCicca & Donald Kenkel & Feng Liu, 2013. "Who Pays Cigarette Taxes? The Impact of Consumer Price Search," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 516-529, May. citation courtesy of