NBER Models of Price Sensitivity by Age/Sex

NBER Models of Price Sensitivity by Age/Sex

This confidential 1982 R.J. Reynolds memo was featured as an exhibit in the United States' Department of Justice case against the tobacco industry. It was written by Diane Stewart Burrows of RJR's Marketing Development Department and was used to demonstrate the marketing of cigarettes to youth. The memo discusses the effects that price increases have on cigarette sales and points out that price affects the incidence of smoking (the rate at which people start to smoke). It contains a chart describing the price elasticity of various groups of smokers by age. One group listed is "TEENS 12-17." Page two of Burrow's memo states,

"...[T]he loss of younger adult makes and teenagers is more important to the long term, drying up the supply of new smokers to replace the old. This is not a fixed loss to the industry: its importance increases with time. In ten years, increased rate per day would have been expected to raise this group's consumption by more than 50%."

The memo shows not only RJR's interest in marketing cigarettes to youth but also the importance of this group to the industry in the long term, and RJR's awareness of the phenomenon of tolerance (the need to increase the amount of substance used over time, considered one of the diagnostic criteria for substance dependence).

Company/Source: R.J. Reynolds Date: 06 Oct 1982 Length: 9 pages Bates No. 501988810/8818 URL: http://legacy.library.ucsf.edu/tid/fjn29d00