Monopsony Abuse or Efficient Purchasing? Quality Measurement in the Tobacco Leaf Market

Posted: 14 Jun 2010

See all articles by F. Andrew Hanssen

F. Andrew Hanssen

Clemson University - John E. Walker Department of Economics

Abstract

In the recent case of Deloach v. Philip Morris, plaintiff tobacco growers accused the major cigarette manufacturers of using unusually structured tobacco auctions to engage in monopsony collusion. The DeLoach case produced one of the largest antitrust settlements ever. The objective of this paper is to evaluate the claims of exercise of monopsony power by exploring why tobacco wholesaling systems (which have evolved dramatically over time) have taken the various forms they have. The paper concludes that the ways in which tobacco leaf has been sold-including the allegedly collusive auctions-developed to combat the fundamental problem that the quality of tobacco leaf is very costly to measure.

JEL Classification: D2, D4, D8, K2, L1, L2, L4, L8

Suggested Citation

Hanssen, F., Monopsony Abuse or Efficient Purchasing? Quality Measurement in the Tobacco Leaf Market. Journal of Competition Law and Economics, Vol. 6, No. 2, pp. 443-456, 2010, Available at SSRN: https://ssrn.com/abstract=1624154 or http://dx.doi.org/nhp022

F. Hanssen (Contact Author)

Clemson University - John E. Walker Department of Economics ( email )

Clemson, SC 29634
United States

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