Look at smoking preferences reveals 'left-digit' price effects

July 31, 2012 By April Reese Sorrow in Addiction

(Medical Xpress) -- Georgia sold 544 million packs of cigarettes in 2010, earning $201 million in state tax revenue. New research from the University of Georgia suggests a $1 tax increase would decrease consumption by 20 percent and almost triple revenues. The same tax is estimated to have similar effects in nine other states.

A recent study by UGA associate professor of psychology James MacKillop, published in the journal Addiction, estimates a $1 per pack would generate a 197 percent increase in tax revenue, yielding almost $600 million in state tax revenues.

The study assessed 1,056 in Georgia, Rhode Island and South Carolina to evaluate how estimated purchasing decisions were affected by price increases, with varying from free to $20 per pack.

"As price goes up, consumption goes down, which reflects how much the product is valued," said MacKillop, who directs the and neuroeconomics workgroup in the UGA Institute for Behavioral Research. "We looked at small intervals of price changes to better understand the relationship between cost and consumption and so we could make specific predictions about changes in prices to inform policymakers."

MacKillop's research highlights the effects of price on cigarette consumption and how price changes impact tax revenues. Georgia's current is $0.37 per pack, nearly the lowest in the country, and a pack of costs on average $4.37, which ranks 48 nationally. Meanwhile, the estimate the state tobacco burden-numbers resulting from and lost productivity-to be $9.02 for every pack sold in Georgia.

The study also looked at the effects a $1 tax increase would have on tobacco burden, estimating a savings of $976 million in Georgia. Together with additional revenue, the net effect of the tax increase was estimated to be $1.37 billion.

"These findings suggest a $1 tax increase is a win-win situation," MacKillop said. "The price increase generates more in tax revenue and saves money in healthcare costs and lost productivity. Plus, a tax increase may ultimately create an environment where fewer people start smoking and more people try to quit smoking."

The study looked at how tax increases would impact Alabama, Georgia, Idaho, Kentucky, Louisiana, North Carolina, North Dakota, South Carolina, Virginia and West Virginia. A $1 tax increase in North Carolina was predicted to increase revenues by $410.7 million and save $824.9 million in tobacco burden, a net effect of $1.23 billion. Virginia, which sells 543 million packs per year, was predicted to generate $402.7 million in additional revenue and save $677.9 million in tobacco burden with a $1 tax increase, a net effect of $1.08 billion.

The study also suggests that the tax impact is partially because of "left-digit" effects, in which consumers are disproportionately affected by the first digit in a product's price.

"The areas where we saw the biggest changes were those with left-digit transitions, or prices where the whole dollar price went up," MacKillop said. Compared to the effect of a pack price increase from $5.60 to $5.80, the decrease in cigarette consumption from $5.80 to $6 was four times larger.

"People are disproportionately affected by those prices because we tend to think of numbers in whole terms," he said. "This has important implications for policymakers because it suggests certain price changes will have a particularly large impact."

The study was funded by the Robert Wood Johnson Foundation. The journal article is available online at onlinelibrary.wile… 03991.x/full.

Journal reference: Addiction search and more info website

Provided by University of Georgia search and more info website

not rated yet  

Rank not rated yet
Relevant PhysicsForums posts

More news stories

Beer-industry advertising guidelines: Rating panels may help industry assess itself

In order to avoid exposing vulnerable groups such as children and young adults to alcohol advertising, industry groups have developed their own self-regulation guidelines. However, these guidelines have been criticized for ...

Addiction created 17 hours ago | popularity not rated yet | comments 0

College women exceed NIAAA drinking guidelines more frequently than college men

In order to avoid harms associated with alcohol consumption, in 2009 the National Institute on Alcohol Abuse and Alcoholism issued guidelines that define low-risk drinking. These guidelines differ for men and women: no more ...

Addiction created 18 hours ago | popularity not rated yet | comments 0 | with audio podcast

Individuals who drink heavily and smoke may show 'early aging' of the brain

Treatment for alcohol use disorders works best if the patient actively understands and incorporates the interventions provided in the clinic. Multiple factors can influence both the type and degree of neurocognitive abnormalities ...

Addiction created 18 hours ago | popularity not rated yet | comments 0 | with audio podcast

Researchers analyze how Spanish smoking relapse booklets are distributed

Researchers from Moffitt Cancer Center and the University of South Florida have evaluated how Florida health care and social service agencies distribute "Libres para Siempre", a Spanish smoking relapse prevention booklet ...

Addiction created May 17, 2013 | popularity not rated yet | comments 0

No significant change seen in overall smokeless tobacco use among US youths

Tobacco use remains the leading preventable cause of death and disease in the United States. Declines in smoking among youths were observed from the late 1990s. "However, limited information exists on trends in smokeless ...

Addiction created May 14, 2013 | popularity not rated yet | comments 0


New research identifies risks, interventions for children's GI health

An increasing number of U.S. children are experiencing gastrointestinal issues that require interventions to resolve, according to research presented at Digestive Disease Week (DDW).

New colonoscope provides ground-breaking view of colon

A ground-breaking advance in colonoscopy technology signals the future of colorectal care, according to research presented today at Digestive Disease Week(DDW). Additional research focuses on optimizing the minimal withdrawal ...

AIDS science at 30: 'Cure' now part of lexicon

Big names in medicine are set to give an upbeat assessment of the war on AIDS on Tuesday, 30 years after French researchers identified the virus that causes the disease.

For combat veterans suffering from post-traumatic stress disorder, 'fear circuitry' in the brain never rests

Chronic trauma can inflict lasting damage to brain regions associated with fear and anxiety. Previous imaging studies of people with post-traumatic stress disorder, or PTSD, have shown that these brain regions can over-or ...

Melon focus headband turns to Kickstarter for rollout plans

(Medical Xpress)—What if the quality of your work depends more on your focus on the piano keys or canvas or laptop than your musical or painting or computing skills? If target users can be convinced, they ...

Temporal processing in the olfactory system

The neural machinery underlying our olfactory sense continues to be an enigma for neuroscience. A recent review in Neuron seeks to expand traditional ideas about how neurons in the olfactory bulb might encode information about ...