Price Responsiveness of Cigarette Demand in US: Retail Scanner Data (1994–2007)

Table 2

Panel fully modified ordinary least squares (FMLOS) estimates and the long-run elasticities.

(a)

Covariates	Model 1				Model 2				Model 3
	FMOLS coef.	𝑡-stat	OLS coef.	𝑡-stat	FMOLS coef.	𝑡-stat	OLS coef.	𝑡-stat	FMOLS coef.	𝑡-stat	OLS coef.	𝑡-stat
Cigarette price (real)	−0.333	13.913	−0.309	10.498	−0.325	13.440	−0.299	10.152	−0.323	13.469	−0.296	10.009
Smokeless tobacco price (real)	0.076	2.881	0.063	2.384	0.070	2.658	0.057	2.168	0.060	2.283	0.046	1.745 Ψ
Per capita income (real)	−0.00004	4.285	−0.00004	4.590	−0.00004	4.634	−0.00005	5.044	−0.00005	5.288	−0.00005	5.861
Workplace CIAL: percentage of population	−0.239	4.702	−0.292	6.220	—		—		—		—
Restaurant CIAL: Percentage of population	—		—		−0.159	3.667	–0.171	4.426	—		—
Bar CIAL: percentage of population	—		—		—		—		0.080	1.560 (NS)	0.097	2.277
Spring	0.083	3.505	0.073	5.387	0.083	3.466	0.073	5.347	0.083	3.471	0.074	5.392
Summer	0.167	6.906	0.152	10.909	0.168	6.919	0.150	10.789	0.168	6.893	0.150	10.740
Fall	0.073	3.019	0.054	3.893	0.072	2.978	0.053	3.820	0.073	3.002	0.054	3.847
Elasticity	Mean				Mean				Mean
Own-price elasticity	−0.750				−0.731				−0.727
Cross-price elasticity	0.185				0.171				0.148
Income elasticity	−0.895				−0.969				−1.116
CIAL elasticity	−0.023				−0.029				0.012
Stationarity tests of FMOLS residuals	𝑡-bar	𝑃 value			𝑡-bar	𝑃 value			𝑡-bar	𝑃 value
IPS	−2.26	0			−2.226	0			−2.226	0
CADF	−2.211	0			−2.171	0.001			−2.231	0

(b)

Covariates	Model 4				Model 5
	FMOLS coef.	𝑡-stat	OLS coef.	𝑡-stat	FMOLS coef.	𝑡-stat	OLS coef.	𝑡-stat
Cigarette price (real)	−0.324	13.389	−0.298	10.140	−0.324	13.493	−0.292	9.895
Smokeless tobacco price (real)	0.068	2.594	0.056	2.120	0.067	2.524	0.052	1.95 Ψ
Per capita income (real)	−0.00004	4.704	−0.00005	5.095	−0.00005	5.010	−0.00005	5.596
Any CIAL: percentage of population	−0.160	3.559	−0.183	4.496	—		—
All CIAL: percentage of population	—		—		−0.092	1.33 Ψ	−0.113	1.89 (NS)
Spring	0.082	3.458	0.073	5.345	0.083	3.480	0.074	5.374
Summer	0.168	6.922	0.150	10.793	0.166	6.790	0.151	10.757
Fall	0.072	2.973	0.053	3.827	0.073	2.979	0.054	3.856
Price, income, and CIAL elasticities	Mean				Mean
Own-price elasticity	−0.728				−0.729
Cross-price elasticity with smokeless tobacco	0.167				0.163
Income elasticity	−0.984				−1.052
CIAL elasticity	−0.030				−0.004
Stationarity tests of the FMOLS residuals	𝑡-bar	𝑃 value			𝑡-bar	𝑃-value
IPS	−2.255	0			−2.221	0
CADF	−2.185	0.001			−2.161	0.002

Note: all models include market-specific intercepts and time trends and year-specific intercepts.IPS denotes the Im et al.[20] test for nonstationarity; CADF denotes Pesaran’s [40] cross-sectionally augmented Dickey-Fuller (CADF) test.
The symbol “Ψ” next to the 𝑡-statistics indicates that the coefficient is not statistically significant at 5% sig.level.