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Presentation from Will Brasic, PhD Candidate in the Department of Economics.
PAPER TOPIC: Hooked on Flavor: Addiction, Present Bias, and the Consequences of E-Cigarette Flavor Policy
ABSTRACT: Flavored e-cigarettes have captured millions of users, disproportionately teens and young adults, amid controversy over how best to regulate them. To evaluate e-cigarette flavor policy, I develop a dynamic model of cigarette and e-cigarette demand featuring addiction and flavor habit stocks, heterogeneous flavor preferences by household age composition, and unobserved heterogeneity. Using NielsenIQ scanner data for 2021–2023, I document substantial habit persistence, heightened flavored e-cigarette demand among households with younger individuals, and a strong preference for non-FDA authorized e-cigarettes. I estimate the dynamic finite mixture model under rational and time-inconsistent discounting to simulate counterfactual flavor policies. Three findings emerge. First, the dominant response to a ban on flavored e-cigarettes is abstention, not cigarette substitution: consumption falls by 14 to 20 cigarettes (1 pack) per month among e-cigarette-persistent households. Second, full enforcement against FDA-unauthorized brands captures 87% of the addiction reduction that results from the comprehensive flavor ban while also cutting new initiation by 44.3% for households with younger individuals. Third, a $2.78/mL excise tax achieves roughly two-thirds of the comprehensive ban's addiction reduction among e-cigarette-persistent households at close to zero consumer-surplus cost, versus $1,400 per household under the ban. Present bias preserves this ranking but reframes part of the loss as an internality correction for over-consumption, turning the tax's effect into a $481 net gain per e-cigarette-persistent household.