Measuring market power of the US cigarette industry

Abstract

The US cigarette industry is attributed to have been involved in cartel practices from time to time. Such practice undermines the actual purpose of deregulation. So far, there have been sparse studies on measuring their market power. The studies done so far have mostly found that the US cigarette industry has not been perfectly competitive. Most of the studies were done a long time ago and the industry has undergone substantial structural changes since then (in the late 1980s and 1990s). Therefore, this study attempts to measure their market power in recent years. Evidence that the US cigarette industry is competitive is found.