Do Smokers Underestimate Risks?

This paper uses a national survey of 3,119 individuals to examine the effect of lung cancer risk perceptions on smoking activity. Both smokers and nonsmokers greatly overestimated the lung cancer risk of cigarette smoking, and the extent of the overestimation is much greater than the extent of underestimation. These risk perceptions in turn significantly reduce the probability of smoking, as suggested by an economic model of risky consumption decisions. Cigarette excise taxes in effect endow individuals with additional risk perceptions comparable to their current assessed lung cancer risks.