Does Government Sponsored Advertising Increase Social Welfare? A Theoretical and Empirical Investigation
AbstractThe main objective of this study was to analyze the effect of advertising on social welfare in a perfectly competitive market where the level of advertising is chosen by a social planner. The theoretical model revealed that social planner sponsored advertising that increases the equilibrium price of the advertised good can increase society’s welfare if the effect of advertising in consumers’ utility is higher than the consumer welfare reducing price effect (producer welfare is increased by the same amount as the reduction in consumer welfare). The empirical illustration focuses on the U.S. state of South Carolina “buy local” food products campaign. The findings suggest that this government sponsored advertising campaign increases total welfare.
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Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 149835.
Date of creation: 30 May 2013
Date of revision:
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Agricultural and Food Policy; Consumer/Household Economics; Demand and Price Analysis; Marketing; D11; D12;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
This paper has been announced in the following NEP Reports:
- NEP-AGR-2013-06-24 (Agricultural Economics)
- NEP-ALL-2013-06-24 (All new papers)
- NEP-MKT-2013-06-24 (Marketing)
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