The impact of advertising on nicotine replacement therapy demand

Abstract

While much is known about the economic determinants of tobacco use, very little is known about the economic determinants of nicotine replacement therapy (NRT) use. This paper is the first econometric study to examine the impact of advertising on NRT demand. Pooled cross-sectional time-series scanner-based data for 50 major metropolitan markets in the USA covering the period between the second quarter of 1996 and the second quarter of 2002 are used in the analysis. Fixed-effects modeling is employed to estimate the NRT demand equation. The estimates indicate that increased advertising of Nicoderm CQ transdermal patches and Nicotrol transdermal patches increases per-capita sales of established Nicoderm CQ and Nicotrol products, respectively. However, increased advertising of Nicorette polacrilex (gum) was found not to significantly increase sales of established Nicorette products. Moreover, decreases in the price of NRT and increases in the price of cigarettes were found to increase per-capita sales of NRT products. Given the documented efficacy of NRT, measures to increase peoples’ awareness of NRT products through advertising, measures to decrease the price of NRT, and measures to increase the price of cigarettes would be effective means to increase the use of NRT, likely leading to decreased cigarette smoking and reductions in the future public health burden caused by tobacco use.