Oligopoly structure and the incidence of cigarette excise taxes
Publication Source

Journal of Public Economics

Journal article
The Americas
Economy status
High-income economies
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A model of oligopoly price behavior and tax incidence for the U.S. cigarette industry for the period 1955–1990 is presented. A cost function is estimated, and shows manufacture to be subject to increasing returns to scale. The mean price elasticity of demand is −0.71. The model indicates that competition among manufacturers has been decreasing since 1980. A simulation shows that an increase in the federal excise tax causes a greater increase in price, and a greater decrease in consumption, than does the same increase in the average of state and local tax rates.