"There was a study that showed cigarette companies competed only through advertising, leading only to higher prices, not to better products."

I think that's a variant of http://en.wikipedia.org/wiki/Prisoner%27s_dilemma ?

If no cigarette company advertises then there's no sunk money, if all of them advertises it's a waste, but if none of the advertise and then one of them starts advertising, then that one wins and the others lose.