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Jan
2013

In Uncategorized

By Nir Nave

After a relatively short learning period

On 01, Jan 2013 | In Uncategorized | By Nir Nave

After a relatively short learning period, pricing in US cigarette markets during the 1920s became characterised by price leadership, with one firm typically RJR announcing a change in prices for its brands that was almost immediately followed by identical changes in the prices of other brands. This led to cigarette prices well above the level that would exist in more competitive markets, generating profits for cigarette producers that were much greater than those earned in other industries.4 These high prices (15 cents per pack for most brands by 1931) and profits, along with the economic hardship of the depression era, however, created an opportunity for new firms to enter the market or for existing small firms to significantly expand their presence by competing on price. Several did so with their “10 cent brands”.

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