The Effect of the Interaction Between Price and Time Preference on Cigarette Consumption

ABSTRACT The primary focus of this essay is to obtain new estimates of the price sensitivity of cigarette consumption and related outcomes using the 1979 cohort of the National Longitudinal Survey of Youth (NLSY79). This work expands on the existing literature on the topic by taking into account measures of time preference in the NLSY79 to examine interactions between these measures and price in the demand function for cigarettes. My specific hypothesis is that those who discount the future consequences of their current actions heavily are likely to be more sensitive to price than those who do not. I find that the people who discount the future heavily are more sensitive to price change.