Understanding the Demand‐Side of an Illegal Market: A Case Study of the Prohibition of Menthol Cigarettes

Economic research has long focused on illegal markets and the consequences of prohibitions. We provide a case study of the proposed prohibition of menthol cigarettes, which are smoked by almost 19 million people in the U.S. Illegal markets for menthol cigarettes could not only blunt the prohibition's intended consequence to reduce smoking but could also lead to unintended consequences. We use data from a discrete choice experiment. Our mixed logit model predicts a substantial potential consumer demand for illegal menthol cigarettes, especially if menthol e-cigarettes are also illegal.