Optimality and distortionary lobbying: control policies of cigarette consumption

We examine the optimal design of public policies directed at controlling the consumption of tobacco. The public authority uses two types of instruments: (i) an excise tax, that hinders consumption by increasing the price of cigarettes, and (ii) prevention and control programs, that reduce smoking by increasing consumers’ awareness about future health harm. On the normative side, the analysis focuses on the optimal mix between the two types of instruments when the objective of the policy maker is to maximize social welfare. On the positive side, the paper investigates how the lobbying activities of the tobacco industry and of anti-tobacco organizations may distort government intervention.