Differential Demand for Conventional, Very-Low Nicotine, and Electronic Cigarettes in the Netherlands

Objective

To assess whether smokers had differential demand for factory made cigarettes (FMCs), very-low nicotine cigarettes (VLNCs), and electronic-cigarettes (ECs) using a behavioral economic approach.

Methods

Data from the Netherlands were available from a web-based consumer survey of smokers and nonsmokers, 16 years or older. Daily smokers (n=1215) completed purchase tasks for each product and indicated the number of cigarettes they would consume in a 24-hour period, across a range of prices (€0-30/ cigarette).

Results

The relationship between consumption and price was quantified through demand curve analyses, generating five indices of demand: 1) peak consumption (intensity), 2) price that initiates elastic demand (Pmax), 3) price that suppresses consumption to zero (breakpoint), 4) maximum expenditure (Omax), and 5) price sensitivity (elasticity). Differential product demand was modeled using generalized estimating equations (GEE), with Bonferroni-adjustment for pairwise comparisons. Greater demand was observed for FMCs versus VLNCs and ECs across all demand indices (p<.001). Intensity and Omax showed greater demand for VLNCs versus ECs (p<.001) but not Pmax, breakpoint, and elasticity. VLNCs and ECs consumption was 4 times more sensitive to price than FMCs. Participants were willing to consume and pay more for FMCs. Moreover, about 30% said that they would not smoke VLNCs and ECs even if offered free of charge.

Conclusion

Smokers valued FMCs more than VLNCs and ECs. FMCs were less sensitive to price increases. Unless preferences change (via positive experiences from use), VLNCs and ECs will need to be priced lower than FMCs to serve as viable substitutes.