The economic analysis of advertising
TLDR
A comprehensive survey of the economic analysis of advertising can be found in this article, with a focus on positive and normative theories of monopoly advertising, price and non-price advertising, theories of advertising and product quality, and theories that explore the potential role for advertising in deterring entry.Abstract:
This chapter offers a comprehensive survey of the economic analysis of advertising. A first objective is to organize the literature in a manner that clarifies what is known. A second objective is to clarify how this knowledge has been obtained. The chapter begins with a discussion of the key initial writings that are associated with the persuasive, informative and complementary views of advertising. Next, work that characterizes empirical regularities between advertising and other variables is considered. Much of this work is conducted at the inter-industry level but important industry studies are also discussed. The chapter then offers several sections that summarize formal economic theories of advertising. In particular, respective sections are devoted to positive and normative theories of monopoly advertising, theories of price and non-price advertising, theories of advertising and product quality, and theories that explore the potential role for advertising in deterring entry. At this point, the chapter considers the empirical support for the formal economic theories of advertising. A summary is provided of empirical work that evaluates the predictions of recent theories of advertising, including work that specifies and estimates explicitly structural models of firm and consumer conduct. This work is characterized by the use of industry (or brand) and even household-level data. The chapter then considers work on endogenous and exogenous sunk cost industries. At a methodological level, this work is integrative in nature: it develops new theory that delivers a few robust predictions, and it then explores the empirical relevance of these predictions at both inter-industry and industry levels. Finally, the chapter considers new directions and other topics. Here, recent work on advertising and media markets is discussed, and research on behavioral economics and neuroeconomics is also featured. A final section offers some concluding thoughts.read more
Citations
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The Theory of Monopolistic Competition.
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References
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Regulating through the Professions: A Perspective on Information Control
Lee Benham,Alexandra Benham +1 more
TL;DR: In the service sector, professional codes of ethics usually prohibit advertising, limit brand name identification, strongly discourage public evaluation of other professionals' work, and place limitations wherever possible on other public indications of the characteristics, quality, or price of the services provided.
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Oligopolistic pricing and advertising
TL;DR: In this paper, a unique Nash Equilibrium (NE) in which sellers choose a common advertising level and mix over prices is proposed, which is generically less than socially optimal.
Journal ArticleDOI
The Economic Consequences of Advertising
TL;DR: The idea that advertising changes tastes seems to have a peculiar appeal to advertising's critics as mentioned in this paper, but this idea is consistent with advertising operating in perfectly competitive markets and with advertising improving welfare.
Journal ArticleDOI
The Intertemporal Stability of the Concentration-Margins Relationship
TL;DR: Using a longitudinal data base, the authors found that there has been a substantial narrowing of the spread between the price-cost margins of concentrated and unconcentrated industries including measures of macroeconomic fluctuations into standard price cost margin regressions.
ReportDOI
Market Provision of Public Goods: The Case of Broadcasting
TL;DR: In this article, the authors present a theory of the market provision of broadcasting and use it to address the nature of market failure in the industry, where advertising levels may be too low or too high, depending on the relative sizes of the nuisance cost to viewers and the expected benefits to advertisers from contacting viewers.