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The effect of advertising on competition: a survey

Опубликовано на портале: 31-03-2003
Journal of Economic Literature. 1979.  Vol. 17. No. 2. P. 453-476. 
The publication of Lester G. Telser's 1964 paper [52] was the starting point for much of the recent literature on advertising and competition. The major finding of that paper was that "there is little empirical support for an inverse association between advertising and competition, despite some plausible theorizing to the contrary" This review does not deal with the question of whether advertising is excessive, nor with the related issues of the welfare economics of advertising or product differentiation. Rather, it focuses on those papers which examine the impact of advertising on barriers to entry and on the extent of price competition. Advertising expenditures are designed to influence consumer demand for the firm's products. They may affect both direct and cross-elasticities of demand. Those who argue that advertising may limit competition maintain that the relevant demand curves[1] are more inelastic and that cross-elasticities are lower as a result, while those who dispute this contention suggest that advertising has no such influence or even that it leads to more elastic demands and higher cross-elasticities. Much controversy has therefore turned on the direction of the effects of advertising on demand elasticities. [Авторский текст]

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