Abstract
Data on the effects of excise taxes are used to investigate the level of competition in the cigarette industry. A lower bound on the numbers equivalent of firms in the context of the conjectural variations model is derived and estimated. Results point to at least a moderately high level of competition and, in particular, allow for the rejection of the perfect cartel model. This paper relies on comparative statics results and hence circumvents recent criticisms of a study of monopoly behavior in the cigarette industry.
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