Do cigarette producers price-discriminate by state? An empirical analysis of local cigarette pricing and taxation

J Health Econ. 1996 Aug;15(4):499-512. doi: 10.1016/s0167-6296(96)00498-5.


This study analyzes the interactive effects of oligopoly pricing, state taxation, and anti-smoking regulations on retail cigarette prices by state, using panel data for the 50 US states between 1960 and 1990. The results indicate that cigarette producers do price-discriminate by state, though the effect is not large relative to the final retail price. There are two further results: (1) state taxes are more than passed on - a 1-cent state tax increase results in a price increase of 1.11 cents, and (2) sellers offset state and local anti-smoking laws with lower prices, thereby blunting effects of the regulations.

Publication types

  • Research Support, Non-U.S. Gov't

MeSH terms

  • Commerce / economics*
  • Economic Competition
  • Fees and Charges / statistics & numerical data*
  • Models, Economic
  • Nicotiana
  • Plants, Toxic
  • Smoking / economics*
  • Taxes / statistics & numerical data*
  • United States