Research Paper: Plain Packaging on the Cigarette

Pages: 4 (1226 words)  ·  Style: Harvard  ·  Bibliography Sources: 7  ·  Level: Master's  ·  Topic: Sports - Drugs  ·  Buy This Paper

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[. . .] (2010) Carlton and Perloff note in their work that: "in a market that is protected from entry, price remains above marginal cost because not firm can enter the market and drive down price..Thus restrictions on entry are the reason that many markets are not perfectly competitive, that that prices are above marginal cost." (Padilla, 2010) It is additionally stated by Carlton and Perloff that if: "large sunk costs are associated with entry and if entry is unsuccessful, the entrant's losses are large" and "in such a setting, threats of strategic behavior may prevent new entry." (Padilla, 2010) The competition level within a market and the price levels are dependent on the "existence and impact of any barriers to new entry." (Padilla, 2010) Padilla writes that plain packaging will affect the supply of both contraband and counterfeit cigarettes and states as follows:

(1) It will make counterfeit cigarettes easier to produce.

(2) It will make contraband cigarettes relatively more attractive to consumers.

The increase in illicit trade is reported to be likely to result in a reduction in the price of cigarettes that are legally traded. This indirect effect on price is reported as having been observed in pharmaceutical markets and it is stated that legal parallel imports have resulted in an impact on the price of patented drugs. " (Padilla, 2010) The European Commission in an investigation on AstraZeneca stated finding that "cheaper parallel imports combined with market forces also exert further downward pressure on the prices of original medicines, especially in high price countries." (Padilla, 2010) Cigarette consumption is reported to be found to be "negatively related to price." (FAO Economic and Social Development Department, nd) Padilla in his work estimates the impact of plain packaging on prices and market size respectively for four different plain packaging scenarios. Padilla states that each scenario "depicts a combination of market elasticity of demand (-0.5 and -1) and an increase of the cross-price elasticity between brands within the same price category." (2010) Padilla states that plain packaging would result in an increase in price competition as well as in lower prices and higher consumption of cigarettes. (2010, paraphrased) Padilla concludes that tobacco control activities have served to undermine cigarette brand equity and that more research is needed because it is likely that smokers "…may respond more positively to tobacco control messages consistent with the identities of their chosen brand, and brand-as-organization elements may assist."

Summary and Conclusion

The research conducted in this study finds that as the price for cigarettes is lowered that the demand for cigarettes increases and as the price for cigarettes rises the demands for cigarettes lowers. In light of these findings, the plain packaging initiative for cigarettes in Australia is erroneous and will prove ineffective in reducing the levels of smoking among Australian individuals.

Bibliography

8 Review of Literature (nd) Economic and Social Development Department. FAO Corporate Document Repository. Retrieved from: http://www.fao.org/docrep/006/y4997e/y4997e0l.htm

Carter, S (2003) From Legitimate Consumers to Public Relations Pawns: the Tobacco Industry and Young Australians. Tob Control 2003 December. Retrieved from: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1766123/

Carter, SM (2003) The Australian Cigarette Brand as Product, Person and Symbol. Tob Control 2003;12. Retrieved from: http://tobaccocontrol.bmj.com/content/12/suppl_3/iii79.full

Cigarettes and Price Inelastic (2012) Plain Sense Economics. Retrieved from: http://www.plain-sense.com/2009/04/04/cigarettes-are-price-inelastic/

Crawford, Moodie, et al. (nd) Plain Tobacco Packaging: A Systematic Review. Retrieved from: http://eppi.ioe.ac.uk/cms/LinkClick.aspx?fileticket=j54fXGDr5Ps%3D&tabid=3327

Parr, V. et al. (nd) Market Research to Determine Effective Plain Packaging of Tobacco Products. Department of Health and Ageing. Retrieved from: http://www.yourhealth.gov.au/internet/yourhealth/publishing.nsf/Content/8B0333A18648BCF3CA25796E0023D826/$File/Market%20Research%20-%20Plain%20Packaging%20of%20Tobacco%20Products.pdf [END OF PREVIEW]

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Plain Packaging on the Cigarette.  (2012, July 2).  Retrieved July 23, 2019, from https://www.essaytown.com/subjects/paper/plain-packaging-cigarette/2943034

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"Plain Packaging on the Cigarette."  2 July 2012.  Web.  23 July 2019. <https://www.essaytown.com/subjects/paper/plain-packaging-cigarette/2943034>.

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"Plain Packaging on the Cigarette."  Essaytown.com.  July 2, 2012.  Accessed July 23, 2019.
https://www.essaytown.com/subjects/paper/plain-packaging-cigarette/2943034.