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The Impact of Advertising Regulation on Industry - The Cigarette Advertising Ban of 1971

  • Shi Qi

    (Florida State University)

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    This paper develops and estimates a dynamic oligopoly model of advertising in the cigarette industry. With this estimated model, I evaluate the impact of the 1971 TV/Radio advertising ban on the cigarette industry. A puzzling fact about this ban is that, while industry advertising spending decreased sharply immediately following its passage, spending then recovered and actually exceeded its pre-ban level within five years. While simple static models cannot account for such a turn of events, the rich dynamic model developed in this paper can. This paper exploits previously confidential micro data, now made public through tobacco litigation. In addition, the paper uses a new concept of Oblivious Equilibrium to handle intractable state space and accelerate equilibrium computation.

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    Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 868.

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    Date of creation: 2011
    Date of revision:
    Handle: RePEc:red:sed011:868
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    Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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