There are four different types of industries that the Tobacco Industry could fall under. These are Perfect Competition, Monopolistic Competition, Oligopoly, and Monopoly. A Perfect Competition arises when there are many firms, each selling an identical product, many buyers, and no restrictions on the entry of new firms into the industry. A Monopolistic competition is a market structure in which a large number of firms compete by making similar but slightly different products. Oligopoly is a market structure in which a small number of firms compete and produce almost identical products. A Monopoly is an industry that produces a good or service for which no close substitute exists and in which there is one supplier that is protected from competition by a barrier preventing the entry of new firms. (1)
After analyzing the Tobacco Industry, my conclusion is that it is an Oligopoly. There are many reasons behind my suspicion. First of all, the definition of an oligopoly states that only a small number of firms compete. From my research, I have found that there are only four main firms in the Tobacco Industry, those being Philip Morris, R.J. Reynolds, Brown & Williamson, and the Lorillard Tobacco Company. These four firms compete between themselves over the same type of products, those dealing with tobacco, namely cigarettes. These products are nearly identical, and the only means of differentiating between each is through advertising. This proves the second main necessity of being called an oligopoly, that of producing products that are practically the same, with very small differentiation.