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Advertising and Welfare: Comment

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  • Carl Shapiro

Abstract

In an earlier article Dixit and Norman studied the welfare effects of advertising. They came to the surprising conclusion that, even accepting postadvertising tastes as the welfare standard, monopoly advertising which raises price is excessive. The point of this comment is to show how and why their analysis fails to apply to the case where there is more than one consumer. Their analysis assumes that preadvertising consumption is distributed efficiently according to postadvertising tastes. Since this is not generally the case, there are gains to advertising ignored by Dixit and Norman.

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Bibliographic Info

Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 11 (1980)
Issue (Month): 2 (Autumn)
Pages: 749-752

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Handle: RePEc:rje:bellje:v:11:y:1980:i:autumn:p:749-752

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Cited by:
  1. S. Anderson & André De Palma, 2012. "Competition for attention in the information (overload) age," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00517721, HAL.
  2. Simon P. Anderson, 2005. "Regulation of Television advertising," Virginia Economics Online Papers 363, University of Virginia, Department of Economics.
  3. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.
  4. Hamilton, Stephen F., 2009. "Informative advertising in differentiated oligopoly markets," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 60-69, January.
  5. Szech, Nora, 2011. "Optimal advertising of auctions," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2596-2607.
  6. Renault, Régis & Anderson, Simon P., 2013. "The Advertising Mix for a Search Good," Economics Papers from University Paris Dauphine 123456789/12407, Paris Dauphine University.
  7. Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, Elsevier.
  8. Simon P. Anderson & Stephen Coate, 2003. "Market Provision of Broadcasting: A Welfare Analysis," Virginia Economics Online Papers 358, University of Virginia, Department of Economics.

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