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The US Cigarette Industry: An Economic and Marketing Perspective

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Objectives: Tobacco company conduct has been a central concern in tobacco control. Nevertheless, the public health community has not taken full advantage of the large economics and marketing literature on market competition in the cigarette industry. Methods: We conducted an unstructured narrative review of the economics and marketing literature using an antitrust framework that considers: (1) market; definition, (2) market concentration; (3) entry barriers, and (4) firm conduct. Results: Since the 1960s, US cigarette market concentration has increased primarily due to mergers and growth in the Marlboro brand. Entry barriers have included brand proliferation, slotting allowance contracts with retailers and government regulation. Whereas cigarette sales have declined, established firms have used coordinated price increases, predatory pricing and price discrimination to sustain their market power and profits. Conclusions: Although the major cigarette firms have exercised market power to increase prices and profits, the market could be radically changing, with consumers more likely to use several different types of tobacco products rather than just smoking a single cigarette brand. Better understanding of the interaction between market structure and government regulation can help develop effective policies in this changing tobacco product market.
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Keywords: CIGARETTES; MARKET COMPETITION; MARKET ENTRY BARRIERS; TOBACCO INDUSTRY

Document Type: Research Article

Publication date: March 1, 2019

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  • Tobacco Regulatory Science (Electronic ISSN 2333-9748) is a rigorously peer-reviewed online scientific journal for the dissemination of research relevant to the regulation of tobacco products. The journal content includes a broad array of research domains, including chemistry, biology, behavior, community, and population-level surveillance and epidemiology, as well as knowledge syntheses (eg, meta-analyses or state-of-the-art reviews) and analytic modeling. All articles describe the policy relevance of the research outcomes. Given the global nature of tobacco regulation, particularly as a result of international and national policies, Tobacco Regulatory Science publishes high quality research that is relevant to global regulatory needs and requirements. Tobacco Regulatory Science is published electronically 6 times per year.
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