What is already known < Market failure in the form of market power is a serious problem in many tobacco markets. < Market power has given cigarette manufacturers considerable pricing power and proﬁts particularly in high income markets. < These problems have been exaggerated by unintended consequences of tobacco control policies. What this paper adds < This paper suggests that market failure, excess proﬁts and public health objectives could be addressed using a system of price cap regulation wherein a cap is placed on the manufacturers’ price but not on the retail price that consumers face. < Such a system would increase government revenue by transferring the excess proﬁts from the industry to the government purse. < Public health beneﬁts would be realised in a number of ways. First, the system would enable additional tobacco control measures to be implemented without further exaggerating the market failure. Second, the industry’s ability to undermine public health measures by using its excess proﬁts to market its products and lobby against tobacco control measures would be curtailed. Finally, it could offer a means of preventing down-trading to cheaper tobacco products and controlling other unwanted industry practices such as cigarette smuggling, price ﬁxing and marketing to the young. resistance, but hope that, if nothing else, this paper will have stimulated debate about anomalies in the current cigarette market that urgently need addressing. Acknowledgements The authors would like to thank Cathy Flower for administrative support. Funding This work was informed by work undertaken as part of the National Cancer Institute, US National Institutes of Health, grant number R01 CA91021 and the European Commission Framework Programme 7 project grant PPACTE, grant agreement number 223323. 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