Job Market Paper
Are Menthol Cigarettes More Addictive? A Cross-Category Comparison of Habit Formation
(Draft available upon request)
Abstract: Menthol cigarettes have been banned in parts of the U.S. based on the premise that they are more addictive than non-menthol cigarettes. In this paper, I propose a framework and a novel identification strategy to compare addictiveness across different categories based on consumer panel data. Using variation in the length of temporary breaks in consumption, I compare the effect of past consumption to that of static preferences in driving consumption levels for each cigarette type. I find that demand for menthol cigarettes depends less on past consumption and therefore menthol cigarettes are less addictive. Despite lower addictiveness, menthol cigarettes compare unfavorably to non-menthol cigarettes on other dimensions of addictive behavior: they are harder to quit successfully and more attractive to first-time users.
Abstract: We analyze structural state dependence in brand choice using variation from brand switching during stock-outs caused by hurricanes. We derive a simple test for structural state dependence based on the time-series of choice persistence for households affected by the stock-outs. Using data from the bottled water category, we show that demand increases substantially before hurricanes and causes households to purchase different brands. We find that purchase behavior reverts back to its pre-hurricane trajectory immediately after a hurricane and we are not able to reject the null hypothesis of no structural state dependence. By contrast, the common approach of estimating structural state dependence based on temporal price variation via a discrete choice model yields a positive effect using data for the same category. We argue that our approach is better suited to identify the causal impact of past choices because it requires fewer assumption and is based on more plausibly exogenous variation in brand switching, i.e. due to stock-outs.
Abstract: We analyze the impact of a temporary shock to food supply on households’ dietary choices. We use hurricane-induced closures of grocery stores, which are typically short term. Results show that store closures influence household purchasing patterns even after the grocery store has reopened. We find a decrease in the nutritional value of household purchases for the five-month period after the store has reopened, despite no change in total expenditures. This finding supports the hypothesis that supply factors play a substantial role in shaping household diets.