Some things I have noticed in the game:
Tobacco seems to be quite unprofitable in the game, generally speaking. I can make a successful Tobacco industry, by following these general principles:
Cigarettes are very brand dependent (50% of rating) so very heavy advertising is generally required to make them popular. Quality matters very little (15%). In the case of Cigars quality matters a lot more and branding is less important.
In general this reflects real life accurately as well. Cigarettes have a very strong brand loyalty among smokers, more so than in most other consumer markets (a Science Paper on this here). In the case of cigars I can't find any research on this other than from sites advertising actual cigars but cigars just don't seem to have the same brand loyalty as cigarettes in general.
The next principle is that Cigarettes tend to be more profitable if the scale of the market is large. For very small markets like one city it will often not generate any positive profit (or barely any) but when you have something like 3 or more cities it seems to generate a positive profit if you charge high enough prices (but compared to other industries it is more difficult).
Finally another observation is that Tobacco products seem to be designed somewhat to be paired with other products such as food/beverages/snacks. This can also somewhat hide or mask the losses/low profits of Tobacco as the gains from those other products will subsidise it to some extent.
So I also had a look at answering another question: Are the Cigarette sales numbers realistic?
My observation is that in the game I could get 500K Cigarette packs sold per month in 3 cities - with a total population of 1.5 million combined. I tried to reasonably cover most of the populated areas of the city and did not charge too high prices (I also tried cutting prices a lot more and could boost this by 50%, but it killed all my profit).
So to judge if this is realistic we must keep in the mind following:
- Cigarette sales have been declining for years due to anti-smoking campaigns and other measures like high taxes. For example in the 1950's every adult in America smoked on average 10 cigarettes a day, today that is down to about 4. Perhaps something could be added to the game which causes a slow decline in tobacco product sales over the years (something like a gradual decline of 50% from 1990 to 2020)?
- Cigars have been rising in popularity over the past couple of decades.
With that in mind if we start the game in 1990 and use the USA figures (somewhere in the middle of the graph linked above) then the amount of cigarettes that would be sold would be 7 per person. The game measures cigarettes as packs, so how many cigarettes in a pack? That depends on country, in the US it is by law at least 20 per pack and in many countries this minimum is also set at this level, so let's use that figure.
So on average an American will smoke (in 1990) a pack every 3 days, which is about 120 a year.
So out of a population of about 300 million that is 36 billion packs of cigarettes per year. Scaled to 1.5 million people in the experimental game above the number of packs that should be roughly sold would be around 180 million per year or 15 million per month. That is a very rough estimate to be clear, but it is an order of magnitude higher than what is depicted in the game, even using 2020 smoking figures the numbers I think are still too low.
So if I had to make a suggestion I would advise a significant increase in the size of the cigarette consumption in the game. Not necessarily by a factor of 30 but probably nearly 10 times. Of course double-checking the math is a good idea, but I think this is roughly accurate.
Another thing I noticed is that cigarettes are listed in the game as having a 30% necessity index. I think this should be a lot higher, more on par with food. Why? Basically cigarettes are highly addictive and low income people tend to smoke more than high income people. Having said that it is also been observed that poor countries smoke less than rich countries. Probably this is due to the fact that you need a certain level of income to afford to smoke in the first place.
There are some other things the game doesn't simulate but have huge impacts on the tobacco market:
- Advertising of tobacco is illegal or heavily restricted in many countries. Here is an interesting map on this. I know that Capitalism Lab doesn't really have much in the way of government restrictions on certain activities but it may be something worth thinking about, perhaps banning it on Radio/TV/Newspapers but encouraging a shift to internet advertising?
- Tobacco tends to be taxed very heavily depending on what country you are from (tax range is typically from 40% all the way up to 90% of the base price). This is one big reason why the 'Base' cigarette prices also matter less. Perhaps we could introduce a tax in the cities for Tobacco products? Good way to raise revenue
--
Anyway there was a lot of rambling above so here is the summary of ideas I have:
- Cigarettes and Cigars are okay in terms of the Brand/Price/Quality ratios so I think they should be kept as-is.
- The Cigarette market should be much larger, probably roughly 10 times above current levels to reflect how much real world people actually smoke. Cigars should be proportionally increased as well.
- Necessity index for Cigarettes should be on par with food items, cigars should also be raised as well but not by as much.
- Perhaps introducing a gradual reduction in Cigarette market size by 50% from 1990 to 2020 could simulate more realistically the tobacco market. That would also include a rise in relative Cigar popularity (but not enough to offset the cigarette decline).
- Maybe introducing bans on Tobacco advertising over time. Possibility of Tobacco taxes?
