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Advertising Bans

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Author Info
Massimo Motta

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Abstract

I show that an advertising ban is more likely to increase -- rather than decrease -- total consumption when advertising does not bring about a large expansion of market demand at given prices and when it increases product differentiation (thus allowing firms to command higher prices). In this case, the main impact of a ban on advertising is to reduce equilibrium prices and thus increase demand. I argue that this is more likely to happen in mature industries where consumer goods are ex--ante (i.e. without advertising) similar and advertising is of the `persuasive' type. The ban is the more likely to increase profits of the firms the weaker the ability of advertising to expand total demand and the less advertising serves to induce product differentiation.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/205.pdf
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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 205.

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Date of creation: Oct 1996
Date of revision: Jan 1997
Handle: RePEc:upf:upfgen:205

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Web page: http://www.econ.upf.edu/

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Related research
Keywords: Advertising; bans; product differentiation; regulation; tobacco; alcohol;

Other versions of this item:

Find related papers by JEL classification:
K2 - Law and Economics - - Regulation and Business Law
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. McGuinness, Tony & Cowling, Keith, 1975. "Advertising and the aggregate demand for cigarettes," European Economic Review, Elsevier, vol. 6(3), pages 311-328, July. [Downloadable!] (restricted)
  2. Nelson, Jon P & Moran, John R, 1995. "Advertising and US Alcoholic Beverage Demand: System-Wide Estimates," Applied Economics, Taylor and Francis Journals, vol. 27(12), pages 1225-36, December.
  3. Baltagi, Badi H & Levin, Dan, 1986. "Estimating Dynamic Demand for Cigarettes Using Panel Data: The Effects of Bootlegging, Taxation and Advertising Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 148-55, February. [Downloadable!] (restricted)
  4. Becker, Gary S & Murphy, Kevin M, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 941-64, November. [Downloadable!] (restricted)
  5. Grossman, Gene M & Shapiro, Carl, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Blackwell Publishing, vol. 51(1), pages 63-81, January. [Downloadable!] (restricted)
  6. Rosenkranz, Stephanie, 1996. "Simultaneous Choice of Process and Product Innovation," CEPR Discussion Papers 1321, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Cabrales, Antonio & Motta, Massimo, 1996. "Country Asymmetries, Endogenous Product Choice and the Speed of Trade Liberalization," CEPR Discussion Papers 1326, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  8. Johnston, Jack, 1980. "Advertising and the aggregate demand for cigarettes : A comment," European Economic Review, Elsevier, vol. 14(1), pages 117-125. [Downloadable!] (restricted)
  9. Stephen, Frank H, 1994. "Advertising, Consumer Search Costs and Prices in a Professional Service Market," Applied Economics, Taylor and Francis Journals, vol. 26(12), pages 1177-88, December.
  10. Kwoka, John E, Jr, 1984. "Advertising and the Price and Quality of Optometric Services," American Economic Review, American Economic Association, vol. 74(1), pages 211-16, March.
  11. Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring. [Downloadable!] (restricted)
  12. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter. [Downloadable!] (restricted)
  13. Hamilton, James L, 1972. "The Demand for Cigarettes: Advertising, the Health Scare, and the Cigarette Advertising Ban," The Review of Economics and Statistics, MIT Press, vol. 54(4), pages 401-11, November. [Downloadable!] (restricted)
  14. James W. Friedman, 1983. "Advertising and Oligopolistic Equilibrium," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 464-473, Autumn. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Nelson, Jon P. & Young, Douglas J., 2001. "Do Advertising Bans Work? An International Comparison," Working Papers 6-01-1, Pennsylvania State University, Department of Economics. [Downloadable!]
  2. Paolo Coccorese, 2001. "Strategic Advertising for Entry Deterrence Purposes," CELPE Discussion Papers 61, CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy. [Downloadable!]
  3. Nelson, Jon P., 2001. "Alcohol Advertising and Advertising Bans: A Survey of Research Methods, Results, and Policy Implications," Working Papers 7-01-2, Pennsylvania State University, Department of Economics. [Downloadable!]
  4. Jeffrey A. Miron, 1999. "The Effect of Alcohol Prohibition on Alcohol Consumption," NBER Working Papers 7130, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Christian Jansen, 2003. "Convergence and the Potential Ban on Interactive Product Placement in Germany," Law and Economics 0302002, EconWPA. [Downloadable!]
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