Smuggling, Camouflaging, and Market Structure

31 Pages Posted: 4 Jul 2004 Last revised: 10 Sep 2021

See all articles by Richard A. Jensen

Richard A. Jensen

University of Notre Dame - Department of Economics

Jerry G. Thursby

Emory University - Department of Economics; Georgia Institute of Technology - Scheller College of Business

Marie C. Thursby

Georgia Institute of Technology - Strategic Management Area; National Bureau of Economic Research (NBER)

Date Written: June 1988

Abstract

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.

Suggested Citation

Jensen, Richard A. and Thursby, Jerry G. and Thursby, Marie C., Smuggling, Camouflaging, and Market Structure (June 1988). Available at SSRN: https://ssrn.com/abstract=439566

Richard A. Jensen

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

Jerry G. Thursby

Emory University - Department of Economics ( email )

1602 Fishburne Drive
Atlanta, GA 30322
United States

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Marie C. Thursby (Contact Author)

Georgia Institute of Technology - Strategic Management Area ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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