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Poutvaara, Panu; Siemers, Lars-H. R. (2008): Smoking and social interaction. In: Journal of Health Economics, Vol. 27, No. 6: pp. 1503-1515
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We study the social interaction of non-smokers and smokers as a sequential game, incorporating insights from social psychology and experimental economics into an economic model. Social norms affect human behavior such that non-smokers do not ask smokers in their midst to stop smoking, even though the disutility from smoking exceeds the utility from social interaction. Overall, the level of smoking is inefficient when tolerating smoking is the social norm. The introduction of smoking and non-smoking areas does not overcome this specific inefficiency. We conclude that smoking bans may represent a required (second-best) policy.