BACKGROUND: Despite efforts to curb tobacco use, the Bangladeshi government hesitates to increase taxes on cheaper cigarettes due to concerns that smokers may switch to bidis, potentially undermining tax revenues and public health goals. However, limited research exists to assess whether such substitution occurs.
This study aimed to estimate the price elasticity of demand for low- and medium-tier cigarettes in Bangladesh and to evaluate the impact of modified (more legible and clearer) warning labels on bidi consumption.
METHODS: A Volumetric Choice Experiment (VCE) was conducted with a representative sample of 791 adult smokers from four districts in Bangladesh. The experiment elicited participants’ stated purchase intentions for low- and medium-tier cigarettes and bidis under hypothetical variations in prices and warning labels (current low-quality vs. high-quality pictorial warnings). Regression models were used to estimate price and income elasticities as well as cross-price elasticities.
RESULTS: Both low- and medium-tier cigarettes were found to be price inelastic. Bidi consumption was not price elastic, and the negative income elasticity confirmed that bidis are an inferior good. There was no evidence of substitution to bidis when the price of low- or medium-tier cigarettes increased, as cross-price elasticities were statistically insignificant. The modified warning labels on bidis had no statistically significant effect on bidi consumption.
CONCLUSIONS: The results suggest that raising the price of low-tier cigarettes is unlikely to incentivize smokers to switch to bidis, alleviating concerns about substitution effects. Merely improving warning label, unless coupled with increased price, will have limited impact. These findings support the policy recommendation for increasing tobacco taxes in Bangladesh to reduce cigarette consumption without compromising tax revenues.