ABSTRACT
This chapter focuses on the demand for tobacco products in general and that of cigarettes in particular. Understanding of tobacco demand is important for several reasons, including determining the effectiveness of various smoking-abatement policies, ascertaining the revenue-generating potential of taxes, and for tracking changes in demand behavior over time, across gender, educational background, religion, age, and so on. Relatively speaking, given the much wider dispersion in consumer tastes relative to the characteristics and the number of suppliers, understanding of tobacco demand seems more complicated than an understanding of the supply side. These efforts have evolved slowly over time with the availability of better data (especially micro data), recognition of related influences (for example cross-price effects, and so on), and better modeling techniques. This chapter will not only summarize the literature and discuss the price/tax policies for smoking reduction, but also provide a flavor of the prominent modeling techniques. Under the price measures to control smoking, our focus is tobacco taxation.
