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Advertising expenditure and consumer prices

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  • Rauch, Ferdinand

Abstract

This paper studies the effect of a change in the marginal costs of advertising on advertising expenditures of firms and on consumer prices. I make use of a policy change in Austria, that involved an increase of the taxation of advertising in parts of the country, and a simultaneous decrease in other parts. I show that advertising expenditures of firms move quickly in the opposite direction of the marginal costs of advertising. Consumer prices increase with advertising in some industries, and decrease in others. This effect correlates with informational differences in advertisements across industries.

Suggested Citation

  • Rauch, Ferdinand, 2013. "Advertising expenditure and consumer prices," International Journal of Industrial Organization, Elsevier, vol. 31(4), pages 331-341.
    • Handle: RePEc:eee:indorg:v:31:y:2013:i:4:p:331-341
    DOI: 10.1016/j.ijindorg.2013.05.001
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Advertising, brands, and prices
      by Eric Crampton in Offsetting Behaviour on 2012-11-16 00:00:00

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    2. Antal, Miklós, 2020. "A “parasite market”: A competitive market of energy price comparison websites reduces consumer welfare," Energy Policy, Elsevier, vol. 138(C).
    3. Kerkhof, Anna & Münster, Johannes, 2015. "Quantity restrictions on advertising, commercial media bias, and welfare," Journal of Public Economics, Elsevier, vol. 131(C), pages 124-141.

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    More about this item

    Keywords

    Advertising; Advertising tax; Advertising and prices;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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