25 Pages Posted: 19 Apr 2012
Date Written: April 18, 2012
The Australian Parliament has passed legislation compelling tobacco products to be sold in “plain packaging”. This paper reviews this legislation and its likely effects on prices, market structure in the tobacco industry and on smoking behaviour. Industry changes following two previous sets of restrictions on advertising are examined for relevant empirical evidence. Without offsetting tax increases the legislation will plausibly reduce prices but significant entry into the industry and greater consumption of counterfeit/illegal cigarettes are unlikely. Provided that tax increases offset any induced fall in prices that might result, plain packaging will reduce cigarette consumption.
Keywords: Cigarettes, Plain Packaging, Competition, Concentration, Advertising, Entry, Exit
JEL Classification: I18, K2, K32, L11, L13, L66, M37
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