The Effect of Price Advertising on Prices: Evidence in the Wake of 44 Liquormart
AbstractThe 44 Liquormart decision, eliminating Rhode Island's ban on liquor price advertising, made Rhode Island the subject of a natural experiment for measuring the effect of advertising on prices. Using Massachusetts prices as controls, we find that advertising stores substantially cut only prices of the products that they advertise. Prices of other products, at both advertising and nonadvertising stores, do not change. Advertising stores cut their prices on products advertised by rivals, while nonadvertising stores do not. We find no reductions in price dispersion across stores. Newspaper-advertising stores appear to draw a higher share of customers after they advertise.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 89 (1999)
Issue (Month): 5 (December)
Other versions of this item:
- Jeffrey Milyo & Joel Waldfogel, 1998. "The Effect of Price Advertising and Prices: Evidence in the Wake of 44 Liquormart," NBER Working Papers 6488, National Bureau of Economic Research, Inc.
- Jeffrey Milyo & Joel Waldfogel, 1998. "The Effect of Price Advertising on Prices: Evidence in the Wake of 44 Liquormart," Discussion Papers Series, Department of Economics, Tufts University 9807, Department of Economics, Tufts University.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
- L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
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