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Advertising bans

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  • Massimo Motta

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 ‘price-increasing’ 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. Copyright The Author(s) 2013

Suggested Citation

  • Massimo Motta, 2013. "Advertising bans," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(1), pages 61-81, March.
  • Handle: RePEc:spr:series:v:4:y:2013:i:1:p:61-81
    DOI: 10.1007/s13209-011-0084-1
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    Cited by:

    1. Clements, Kenneth W., 2004. "Three facts about marijuana prices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), pages 1-30.
    2. Simon P. Anderson & Federico Ciliberto & Jura Liaukonyte & Régis Renault, 2016. "Push-me pull-you: comparative advertising in the OTC analgesics industry," RAND Journal of Economics, RAND Corporation, vol. 47(4), pages 1029-1056, November.
    3. Jeffrey A. Miron, 1997. "The Effects of Alcohol Prohibition on Alcohol Consumption," Papers 0078, Boston University - Industry Studies Programme.
    4. 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.
    5. Christian Jansen, 2003. "Convergence and the Potential Ban on Interactive Product Placement in Germany," Law and Economics 0302002, University Library of Munich, Germany.
    6. 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.

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    More about this item

    Keywords

    Advertising; Bans; Product differentiation; Regulation; Tobacco; Alcohol; K2; L51;
    All these keywords.

    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
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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