Smuggling, Camouflaging, and Market Structure
We examine how market structure and enforcement affect smuggling and welfare in a model where smuggling is camouflaged by legal sales. Conditions are given for when some, but not necessarily all, firms smuggle. With camouflaging, the market price is below the price when all sales are legal, so smuggling improves welfare if the price effect outweighs excess smuggling cost. This welfare effect is directly related to the degree of competition. Increased enforcement in this model potentially reduces welfare. The model is shown to be consistent with evidence on cigarette smuggling in the United States for 1975–1982.
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|Date of creation:||1991|
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- Badi H. Baltagi & Rajeev K. Goel, 1987. "Quasi-Experimental Price Elasticities of Cigarette Demand and the Bootlegging Effect," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(4), pages 750-754.
- Alan Deardorff & Wolfgang Stolper, 1990.
"Effects of smuggling under african conditions: A factual, institutional and analytic discussion,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 126(1), pages 116-141, March.
- Deardorff, A.V. & Stolper, W.F., 1988. "Effects Of Smuggling Under African Conditions: A Factual, Institutional And Analytic Discussion," Working Papers 230, Research Seminar in International Economics, University of Michigan.
- Sheikh, Munir A., 1974. "Smuggling, production and welfare," Journal of International Economics, Elsevier, vol. 4(4), pages 355-364, November.
- Baltagi, Badi H & Levin, Dan, 1986. "Estimating Dynamic Demand for Cigarettes Using Panel Data: The Effects of Bootlegging, Taxation and Advertising Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 148-55, February.
- repec:fth:michin:230 is not listed on IDEAS
- Gene M. Grossman & Carl Shapiro, 1988. "Foreign Counterfeiting of Status Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 79-100.
- Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August.
- Ethier, Wilfred J, 1986. "Illegal Immigration: The Host-Country Problem," American Economic Review, American Economic Association, vol. 76(1), pages 56-71, March.
- Sullivan, Daniel, 1985. "Testing Hypotheses about Firm Behavior in the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 586-98, June.
- Gene M. Grossman & Carl Shapiro, 1986. "Foreign Counterfeiting of Status Goods," NBER Working Papers 1915, National Bureau of Economic Research, Inc.
- Pitt, Mark M., 1981. "Smuggling and price disparity," Journal of International Economics, Elsevier, vol. 11(4), pages 447-458, November.
- Sumner, Daniel A, 1981. "Measurement of Monopoly Behavior: An Application to the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1010-19, October.
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