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Would Big Tobacco Have Been Better?: the Social Welfare Implications of Antitrust Action in the Presence of Negative Externalities

Author

Listed:
  • Gulbrandsen, E.
  • Skeath, S.

Abstract

This paper considers the role of antitrust action in markets with negative externalities and the social welfare consequences of the 1911 break-up of American Tobacco. A theoretical model shows that monopoly can be the preferred market structure in some cases. We provide rough estimates of the magnitude of the excise tax necessary to offset external costs in the cigarette industry and compare the estimates to current tax levels.

Suggested Citation

  • Gulbrandsen, E. & Skeath, S., 1999. "Would Big Tobacco Have Been Better?: the Social Welfare Implications of Antitrust Action in the Presence of Negative Externalities," Papers 99-07, Wellesley College - Department of Economics.
  • Handle: RePEc:fth:wecoec:99-07
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    Cited by:

    1. Tore Nilssen, 2011. "Risk externalities in a payments oligopoly," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 10(3), pages 211-234, December.

    More about this item

    Keywords

    SOCIAL WELFARE ; TOBACCO ; TAXATION ; ANTITRUST LEGISLATION;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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