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Nonparametric Tests of Market Structure: An Application to the Cigarette Industry

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Author Info
Ashenfelter, Orley
Sullivan, Daniel

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Abstract

The revealed preference approach is used to construct a nonparametric test of the monopoly model and some simple generalizations of it, and the test is applied to data for the cigarette industry. It exploits the maintained hypothesis that variations in the excise tax charged on a package of cigarettes allow us to assess seller reactions to common exogenous variations in marginal cost. Results indicate that the monopoly hypothesis, and other simple models that do not embody at least a moderate amount of competition, serve as poor predictors of the effects of excise-tax changes on cigarette prices, sales, and revenues. Copyright 1987 by Blackwell Publishing Ltd.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Industrial Economics.

Volume (Year): 35 (1987)
Issue (Month): 4 (June)
Pages: 483-98
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Handle: RePEc:bla:jindec:v:35:y:1987:i:4:p:483-98

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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  1. Sophia Delipalla & Owen O'Donnell, 1998. "The Comparison Between Ad Valorem and Specific Taxation under Imperfect Competition: Evidence from the European Cigarette Industry," Studies in Economics 9802, Department of Economics, University of Kent. [Downloadable!]
  2. Sophia Delipalla & Owen O'Donnell, 1999. "Estimating Tax Incidence, Market Power and Market Conduct: The European Cigarette Industry," Studies in Economics 9901, Department of Economics, University of Kent. [Downloadable!]
  3. Catherine D. Wolfram, 1999. "Measuring Duopoly Power in the British Electricity Spot Market," American Economic Review, American Economic Association, vol. 89(4), pages 805-826, September. [Downloadable!] (restricted)
  4. Kellie Curry Raper & H. Alan Love & C. Richard Shumway, 2000. "Determining market power exertion between buyers and sellers," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(3), pages 225-252. [Downloadable!]
  5. Joseph J. Doyle, Jr. & Krislert Samphantharak, 2005. "$2.00 Gas! Studying the Effects of Gas Tax Moratorium," Working Papers 0517, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research. [Downloadable!]
  6. Jin, Hyun & Sun, Changyou & Koo, Won, 2003. "The Effect Of Food-Safety Related Information On Consumer Preference: The Case Of The Bse Outbreak In Japan," Agribusiness & Applied Economics Report 23636, North Dakota State University, Department of Agribusiness and Applied Economics. [Downloadable!]
  7. Boone, J., 2003. "'Be nice, unless it pays to fight' : a new theory of price determination with implications for competition policy," Discussion Paper 11, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
    Other versions:
  8. Thorsten Fischer & David R. Kamerschen, 2003. "Measuring Competition in the U.S. Airline Industry Using the Rosse-Panzar Test and Cross-Sectional Regression Analyses," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 73-93, May. [Downloadable!]
  9. Jan Boone, 2005. "Be Nice, unless it Pays to Fight," Working Papers 05-10, Utrecht School of Economics. [Downloadable!]
  10. Sherrill Shaffer, 2000. "Correlation Tests for Competitive and Cournot Equilibria," Review of Industrial Organization, Springer, vol. 16(3), pages 313-318, May. [Downloadable!] (restricted)
  11. Boone, J., 2000. "Competition," Discussion Paper 104, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  12. Noelke, Corinna M. & Raper, Kellie Curry, 1998. "Parametric And Nonparametric Market Power Tests: An Empirical Investigation," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20875, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  13. Schmalensee, Richard L., 1987. "Empirical studies of rivalrous behavior," Working papers 1990-87., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  14. Khosrow Doroodian & Barry J. Seldon, 1991. "Advertising and Cigarette Consumption," Eastern Economic Journal, Eastern Economic Association, vol. 17(3), pages 359-366, Jul-Sep. [Downloadable!]
  15. Joseph J. Doyle, Jr. & Krislert Samphantharak, 2006. "$2.00 Gas! Studying the Effects of a Gas Tax Moratorium," NBER Working Papers 12266, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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