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The Role of Retail Prices and Promotions in Determining Cigarette Brand Market Shares

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  • John Tauras
  • Richard Peck
  • Frank Chaloupka

Abstract

Over the past two decades, two forms of price competition have emerged within the cigarette industry: the introduction and spread of discount and deep discount cigarettes and the increased use of price-related promotions. In this paper, we use quarterly market-level, scanner-based data on cigarette prices, promotions, and sales for 50 US markets over the period from 1994-IV through 2002-II to examine the impact of price and promotions on market shares for premium, discount, and deep discount brand cigarettes. Our estimates indicate that changes in relative prices, including those resulting from promotions, account for much of observed changes in market shares. Copyright Springer 2006

Suggested Citation

  • John Tauras & Richard Peck & Frank Chaloupka, 2006. "The Role of Retail Prices and Promotions in Determining Cigarette Brand Market Shares," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(3), pages 253-284, May.
    • Handle: RePEc:kap:revind:v:28:y:2006:i:3:p:253-284
    DOI: 10.1007/s11151-006-0016-6
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    References listed on IDEAS

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    1. Jeremy Bulow & Paul Klemperer, 1998. "The Tobacco Deal," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1998 Micr), pages 323-394.
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    Cited by:

    1. Vivienne Pham & David Prentice, 2010. "An empirical Analysis of the Counter-factual: A Merger and Divestiture in the Australian Cigarette Industry," Working Papers 2010.08, School of Economics, La Trobe University.
    2. Yuqing Zheng & Chen Zhen & Daniel Dench & James M. Nonnemaker, 2017. "U.S. Demand for Tobacco Products in a System Framework," Health Economics, John Wiley & Sons, Ltd., vol. 26(8), pages 1067-1086, August.
    3. Yanwen Wang & Michael Lewis & Vishal Singh, 2016. "The Unintended Consequences of Countermarketing Strategies: How Particular Antismoking Measures May Shift Consumers to More Dangerous Cigarettes," Marketing Science, INFORMS, vol. 35(1), pages 55-72, January.
    4. Dionysis Spanopoulos & Elena Ratschen & Ann McNeill & John Britton, 2012. "Retail Price and Point of Sale Display of Tobacco in the UK: A Descriptive Study of Small Retailers," PLOS ONE, Public Library of Science, vol. 7(1), pages 1-6, January.
    5. Vivienne Pham & David Prentice, 2013. "A Random Coefficients Logit Analysis of the Counterfactual: A Merger and Divestiture in the Australian Cigarette Industry," Working Papers 2013.04, School of Economics, La Trobe University.
    6. Natsuko Iwasaki & Victor Tremblay, 2009. "The effect of marketing regulations on efficiency: LeChatelier versus coordination effects," Journal of Productivity Analysis, Springer, vol. 32(1), pages 41-54, August.

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    More about this item

    Keywords

    brand choice; cigarettes; master settlement agreement; premium; discount and deep discount brands; price and promotion; JEL classification; L1; L66; M30;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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