Consumption Demand for Tobacco Products in Thailand: A Case Study of Domestic Cigarettes, Imported Cigarettes and Pipe Tobacco

Abstract

The three objectives of this research were to identify the influence of the factors affecting the demand for tobacco products, including domestic cigarettes (DC), imported cigarettes (IC), and hand-rolled cigarettes (HRC), and the elasticity of the demand of the three groups of consumers in the adolescent, working age, and elderly age groups; estimate the consumer surplus of each type of cigarette for each age group; and estimate the relationship in the demand model and cigarette price model with a simultaneous equation model (SEM) system by using the three-stage least squares (3SLS) method with time series data from 1989 to 2019. The research results illustrated that the demand factors had different impacts on the number of consumers of each type of cigarette in each age range. The elasticity of demand suggests that domestic cigarettes are luxury goods for adolescents but are normal goods for elderly consumers. In contrast, import cigarettes are luxury goods for working age people and hand-rolled cigarettes are normal goods for elderly consumers. Moreover, domestic cigarettes are a substitution for imported cigarettes for working age consumers and hand-rolled cigarettes customers, while imported cigarettes are a substitution for adolescent domestic cigarette customers, and hand-rolled cigarettes are also a substitution for adolescent domestic cigarette and adolescent imported cigarette customers. Price is the most sensitive factor for working age imported cigarette customers, while elderly hand-rolled cigarette customers comprise the largest customer base for Thailand’s tobacco products. According to the results, the relevant agencies should be very careful in implementing measures to raise tobacco prices.