Donald Kenkel

With the growth of sales of e-cigarettes and other alternative nicotine products, governments face the new challenge of crafting public health messages that provide information to consumers about these less risky but not risk-free products. Bayesian learning serves as the theoretical framework for our analysis of how smokers form their perceptions of the risks of e-cigarettes based on the risks of smoking. This paper consists of two parts. First, we conduct a cross-country descriptive analysis of government messaging and smokers’ perceptions of e-cigarette risks. We study a diverse group of eight countries: Australia, China, Indonesia, Japan, Malaysia, Sweden, the U.K. and the U.S. We find that public health messages range widely across the countries. In online cross-country surveys of adult smokers, on average perceptions of e-cigarette risks are associated with their perceptions of the risk of smoking and with their countries’ messaging. Notably, in all eight countries many smokers incorrectly believe that e-cigarettes are relatively more harmful than smoking and over-estimate the absolute risks of e-cigarettes. In the second part of our study, we report the results of online randomized experiments that compare the effects of different e-cigarette risk messaging about an outbreak of lung injuries (given the acronym EVALI). The U.K. public health message about the low risk of e-cigarettes relative to smoking reduced smokers’ incorrect risk perceptions, while the U.S. public health message increased incorrect risk perceptions.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

This paper discusses the long-standing illegal markets for cigarettes and the more recently emerged illegal markets for e-cigarettes. We identify three distinctive market fundamentals that help explain many features of the illegal markets. First, in contrast to some illegal goods, many countries have sizable legal markets for cigarettes and e-cigarettes alongside the illegal markets. In 2024, tobacco products generated almost $1 trillion in revenues; e-cigarettes generated $26 billion dollars. It is estimated that illegal markets account for about 10 percent of global cigarette consumption. Second, the illegal markets have arisen to evade high excise taxes that increase prices and regulations that restrict the availability of desirable features of legal products. The taxes and regulations have been adopted as public health measures with the goal of reducing tobacco consumption; however, these same policies drive the formation of illegal markets. Third, demand-side linkages mean that taxation, regulatory, and enforcement policies targeted at legal and illegal markets for cigarettes will affect legal and illegal markets for e-cigarettes, and vice versa. The connection between the markets means regulatory policy for one product can drive consumers both to the illegal market for the product and to the legal and illegal market for the other product.

California’s statewide menthol cigarette ban creates a central empirical puzzle: while legal sales of menthol cigarettes fall to near zero following the policy, menthol smoking persists. This study investigates the mechanisms underlying this divergence using retail scanner data, population-based surveys, and an original survey of California smokers. Retail data confirm that menthol cigarettes were effectively removed from the legal market, but the decline is accompanied by substitution toward non-menthol cigarettes and menthol-like products. At the same time, population-based surveys indicate no meaningful change in smoking prevalence and continued menthol use. To reconcile these patterns, we use original survey data with within-individual variation to examine behavioral responses directly. We find that 63 percent of menthol smokers continue to report menthol use after the ban, 21 percent switch to non-menthol cigarettes, and few quit. Hazard model estimates show no sustained increase in cessation. The findings indicate that the menthol ban primarily reshapes product composition rather than reducing smoking. Behavioral adjustment occurs mainly through substitution and continued access via existing illicit markets, highlighting the importance of accounting for consumer responses when evaluating product-based tobacco regulations.

This study investigates how sales bans influence young adults' perceptions and their interest in using combustible and non‐combustible nicotine products in Türkiye. Using a scenario‐based, between‐subjects experimental design, participants aged 18–30 were randomly assigned to one of four conditions: cigarettes or e‐cigarettes, framed as either legally available or sold illegally (under‐the‐counter). Participants evaluated these products based on perceived addictiveness, health risks, social acceptability, and personal willingness to use them. Our findings indicate that participants are significantly less interested in using illegal cigarettes and illegal e‐cigarettes compared to legally sanctioned cigarettes ( p < 0.01). Further analysis suggests that these effects are primarily driven by the legal status of the product (legal vs. under‐the‐counter) rather than the product type (cigarette vs. e‐cigarette). Consequently, the results suggest that the illegality of a nicotine product directly reduces consumer interest. Conversely, we find no significant evidence that legal status affects perceived attributes, such as addictiveness, social acceptability, health risks, or physical discomfort during use. Beyond the direct deterrent effect, the data provides no evidence for the expressive function of law in this context.

The 2009 Tobacco Control Act granted the Food and Drug Administration broad authority to regulate cigarettes and other tobacco products, which was further expanded in 2016 to include e‐cigarettes. To study the impact of FDA tobacco regulations, we designed and conducted a discrete choice experiment to collect data on adult subjects' stated preferences for cigarettes, e‐cigarettes, and quitting. We find evidence that enacted, pending, and potential FDA regulations may have important influences on adult smokers' choices. We estimate that when the long‐delayed requirement of cigarette graphic warning labels is implemented, it could decrease the probability that adult smokers choose cigarettes by 5.30 percentage points. However, our results suggest that recent policy trends towards tighter regulation of e‐cigarettes might work in the opposite direction. We estimate that the FDA‐required warning label on e‐cigarettes increases the probability of cigarette choices by 1.9 percentage points. Based on the estimated effect of a flavor ban, our results suggest that full enforcement of FDA marketing denial orders for almost all flavored e‐cigarettes could increase the probability of cigarette choices by 2.8 percentage points. Finally, raising e‐cigarette prices mainly moves respondents away from e‐cigarettes towards combustible cigarettes rather than to attempting to quit tobacco products altogether.

A growing body of economic research explores the impacts of U.S. e-cigarette regulations on consumer tobacco choices, but less is known about e-cigarette regulation in China, the world’s largest tobacco market. We study China’s ban of flavored e-cigarettes. The ban of all flavors in e-cigarettes other than tobacco was part of a comprehensive package of regulatory policies adopted in 2022. We collected stated preference data through two discrete choice experiments conducted in 2021 and 2023, with about 600 subjects each. All subjects were adult current smokers. In the experiments, subjects made hypothetical choices between cigarettes, e-cigarettes, and quitting. Product prices and the attributes of e-cigarettes were experimentally varied, allowing us to identify the impact of flavor availability on stated preferences. We use the data to estimate conditional logit models and to predict the impact of the flavor ban and other policies. The empirical results suggest that a ban of flavored e-cigarettes decreases stated preferences for e-cigarettes but also has the unintended consequence to increase stated preferences for cigarettes. Despite the predicted decrease in e-cigarette choices, the predicted choice share of flavored e-cigarettes when they are illegal but loosely enforced is 53% of the predicted share when legal. This large illegal share is consistent with anecdotal evidence and with the evidence from our 2023 background survey that flavored e-cigarettes remain popular after the ban although fewer vapers reported getting their e-cigarettes from specialty or general retailers.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

This paper is based on public comments I submitted in 2023 to the Office of Management and Budget (OMB) on the draft revisions to its Circular A-4 guidance on “Regulatory Analysis.” It includes my comments as submitted and a “prologue” and “epilogue” written after OMB published the 2023 version of Circular A-4. The major issues discussed in my and the other public comments on the 2023 revisions have been long been, and will remain, central to the practice of regulatory BCA. My public comments compare the 2023 revisions to the principles and practice of standard efficiency-based benefit–cost analysis (BCA). Standard BCA is a tool to evaluate whether regulations fix market failures and improve economic efficiency. The 2023 revisions to Circular A-4 depart from standard BCA in important ways.

Economic research has long focused on illegal markets and the consequences of prohibitions. We provide a case study of the proposed prohibition of menthol cigarettes, which are smoked by almost 19 million people in the U.S. Illegal markets for menthol cigarettes could not only blunt the prohibition's intended consequence to reduce smoking but could also lead to unintended consequences. We use data from a discrete choice experiment. Our mixed logit model predicts a substantial potential consumer demand for illegal menthol cigarettes, especially if menthol e‐cigarettes are also illegal.

Australia had adopted a novel approach to e‐cigarette policy by requiring a physician's prescription to lawfully obtain nicotine e‐cigarettes. We conducted an online discrete choice experiment to gauge how adult Australian smokers made hypothetical choices between cigarettes, prescription e‐cigarettes, non‐prescription e‐cigarettes and quitting. We estimate a mixed logit model, which allows us to predict the market shares under different policy scenarios. The mixed logit model also provides estimates of consumer willingness to pay for the benefits from the prescription status of e‐cigarettes and the costs of illegal e‐cigarette markets. We estimate that the average utility loss from an illegal retail market is worth AU$7.90 per pack equivalent. We use the corresponding estimates of the compensating variations in income to conduct cost–benefit analyses of possible reforms to Australian e‐cigarette regulation. In aggregate, we estimate that the benefits of allowing but not requiring prescriptions of e‐cigarettes are AU$1.8 billion per year. Our paper provides a novel contribution to research on e‐cigarette regulation and provides a case study for the policy implementation in Australia. Our paper is also part of our research agenda to explore and develop methods to conduct policy analysis and cost–benefit analysis of regulatory policies that might create illegal markets.