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Mostly Harmless Regulation? Electronic Cigarettes, Public Policy and Consumer Welfare

Donald S. Kenkel, Sida Peng, Michael F. Pesko, Hua Wang

NBER Working Paper No. 23710
Issued in August 2017, Revised in March 2019
NBER Program(s):Health Economics

Electronic cigarettes are a less harmful alternative to combustible cigarettes. We analyze data on e-cigarette choices in an online experimental market. Our data and mixed logit model capture two sources of consumer optimization errors: over-estimates of the relative risks of e-cigarettes; and present bias. Our novel data and policy analysis make three contributions. First, our predictions about e-cigarette use under counter-factual policy scenarios provide new information about current regulatory tradeoffs. Second, we provide empirical evidence about the role consumer optimization errors play in tobacco product choices. Third, we contribute to behavioral welfare analysis of policies that address individual optimization errors.

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Document Object Identifier (DOI): 10.3386/w23710

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