Convergence Of Market Shares In The U.S. Cigarette Industry

Abstract

Many studies examine the degree of rivalry in an industry by utilizing measures of market share instability, with greater (lesser) volatility of market shares coinciding with greater (lesser) rivalry. This short paper extends this line of research by addressing long run instability of market shares. In particular, we test for the convergence of market shares in the U.S. cigarette industry using unit root procedures. Our finding that market shares for pairs of firms rarely converge suggests that market shares are unstable in the long run. Hence, rivalry has remained quite intact in the cigarette industry.