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The now-famous merger movement that highlighted the economic cross-currents of the late nineteenth century created no more controversial enterprise than James B. Duke's American Tobacco Company. From the time of its incorporation in 1890, Duke's firm dominated the cigarette business, for which it is so justly renowned, but this controlling position by no means extended into other branches of the industry, particularly the manufacture and marketing of chewing tobacco, or what was known as plug. Yet with almost ineluctable force, Duke and his associates gradually extended their domination to this segment of the business, albeit by a much more uncertain course that included the “plug war” of the mid-1890s and some questionable securities transactions later on. While Dr. Burns takes no side in the still-simmering controversies of the day, in this essay he examines the historical events through which American Tobacco acquired its dominant position in chewing tobacco; equally important, he brings economic theory and new empirical evidence to bear on the contentious issue of predatory pricing as a strategy of monopolization, and from that emerges his surprising conclusion.
The opening decades of the twentieth century saw various advertisers embark on a concerted effort to create professional instruction at American universities. They had two objectives. They thought that such instruction might help individual firms determine precisely how advertising worked in the marketplace — and thereby create a science of advertising — and they hoped that university education would transform their business into a full-fledged profession. Yet these efforts brought mixed results. As such instruction came into being, advertisers found that they had little influence over the education they had sought to promote, and they found that such training had chosen to follow one of two divergent paths, neither of which the industry thought wholly acceptable. Even more to their dismay, advertisers found that this education did not in fact convert their business into a profession.