Estimating the Price Elasticity of Cannabis Use Among U.S. Adults: Evidence from States with Recreational Cannabis Commercialization.

Abstract

Introduction: Following the spread of recreational cannabis legalization and commercialization, cannabis has become increasingly available at lower prices. As policies regulating prices are common tools to control the demand for commercialized drugs, it is crucial to understand how cannabis use responds to price changes. In this study, we assessed the association between wholesale prices for legal cannabis flower and adults' self-reported current cannabis use in ten states with recreational cannabis commercialization in the U.S. Materials and Methods: We conducted a secondary data analysis using individual-level data on cannabis use from the longitudinal Population Assessment of Tobacco and Health Study, during 2015 and 2021. Our analysis included 19,812 U.S. adults from ten states that legalized recreational cannabis sales during the study period. We first conducted logistic regressions to estimate the association between state-level cannabis prices and individual current cannabis use. To address potential endogeneity of cannabis prices, we then employed generalized method of moment (GMM) estimator, using cannabis taxes as an instrumental variable (IV). Results: IV-based GMM regressions suggested that cannabis taxes were a significant predictor of cannabis prices. However, the association between legal cannabis flower prices and adults' current cannabis use was negative but statistically insignificant (coefficient = -0.18, p = 0.086). Price elasticity estimates for current cannabis use ranged from -0.66 to -0.59 across different model specifications. Conclusion: In the initial years of recreational cannabis commercialization in the U.S., the price elasticity of cannabis use among adults was negative but statistically insignificant. Given the rapid progression of commercialization, further research utilizing longer-term data is needed.