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The paradox of China’s tobacco industry: competition through monopoly policy
[The market for “lemons”: quality uncertainty and the market mechanism]

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  • Allen Liao
  • Benjamin Cole

Abstract

This study documents the evolution of China’s tobacco industry over 70 years from that of unordered local trade to ordered competitive national industry. We develop a theoretical framework regarding three levers the central government utilized—quota pliability, price tiering, and public rankings—to shift the attention of producers from merely fulfilling quotas to seeking quota partners, building scale economies, and developing high quality brands. The findings provide insights to those interested in planned economies, industry dynamics, and China’s industrial development.

Suggested Citation

  • Allen Liao & Benjamin Cole, 2021. "The paradox of China’s tobacco industry: competition through monopoly policy [The market for “lemons”: quality uncertainty and the market mechanism]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 30(6), pages 1479-1498.
    • Handle: RePEc:oup:indcch:v:30:y:2021:i:6:p:1479-1498.
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    File URL: http://hdl.handle.net/10.1093/icc/dtab024
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