The demand for nicotine replacement therapies

Abstract

This paper reports on the first econometric study to examine the determinants of nicotine replacement therapy (NRT) demand. Pooled cross-sectional time-series scanner-based data for 50 major metropolitan markets in the United States covering the period between the second quarter 1996 and the third quarter 1999 are used in the analysis. Fixed-effects modeling is employed to assess the impact of NRT prices, cigarette prices, and other determinants on NRT demand. The estimates indicate that decreases in the price of NRT and increases in the price of cigarettes would lead to substantial increases in per-capita sales of NRT products. The average own-price elasticity of demand, which measures the responsiveness of consumer demand for NRT products to changes in the price of NRT, for Nicoderm CQ and Nicorette, is -2.33 and -2.46, respectively. The average cross-price elasticity of demand, which measures the responsiveness of consumer demand for NRT products to changes in the price of cigarettes, for Nicoderm CQ and Nicorette, is 0.772 and 0.764, respectively.