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The Economics of Advertising
This book brings together over thirty of the most influential previously published articles on the economics of advertising. Topics covered include an exploration of the welfare consequences of persuasive advertising and informative advertising; an analysis of informative advertising in search-goods markets and as a signal of quality in experience-goods markets; and an examination of the use of advertising to deter entry to the market by rivals, to pre-empt rivals or conversely to collude with them. The volume features both theoretical and empirical contributions to these topics.
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Critical Acclaim
Contributors
Contents
More Information
This book brings together over thirty of the most influential previously published articles on the economics of advertising. Topics covered include an exploration of the welfare consequences of persuasive advertising and informative advertising; an analysis of informative advertising in search-goods markets and as a signal of quality in experience-goods markets; and an examination of the use of advertising to deter entry to the market by rivals, to pre-empt rivals or conversely to collude with them. The volume features both theoretical and empirical contributions to these topics.
Critical Acclaim
‘A unique feature of the book is the systematic and integrative approach used in the presentation of a necessary theoretical framework in the area under study before providing any empirical evidence.’
– M.M. Anand, Global Business Review
‘This volume collects the classic articles on the economics of advertising together with some of the best recent papers. Advertising is often thought of as being either persuasive or informative, and both views are represented in this collection. There is also a good balance between theoretical and empirical work.’
– Robert Porter, Northwestern University, US
– M.M. Anand, Global Business Review
‘This volume collects the classic articles on the economics of advertising together with some of the best recent papers. Advertising is often thought of as being either persuasive or informative, and both views are represented in this collection. There is also a good balance between theoretical and empirical work.’
– Robert Porter, Northwestern University, US
Contributors
34 articles, dating from 1950 to 1999
Contributors include: L. Benham, G. Butters, G. Grossman, P. Milgrom, P. Nelson, G. Ramey, J. Roberts, R. Schmalensee, C. Shapiro, J. Sutton
Contributors include: L. Benham, G. Butters, G. Grossman, P. Milgrom, P. Nelson, G. Ramey, J. Roberts, R. Schmalensee, C. Shapiro, J. Sutton
Contents
Contents:
Acknowledgements
Introduction Kyle Bagwell
PART I ADVERTISING: PERSUASION AND WELFARE
1. Nicholas Kaldor (1950), ‘The Economic Aspects of Advertising’
2. Avinash Dixit and Victor Norman (1978), ‘Advertising and Welfare’
3. Carl Shapiro (1980), ‘Advertising and Welfare: Comment’
4. Franklin M. Fisher and John J. McGowan (1979), ‘Advertising and Welfare: Comment’
5. Gary S. Becker and Kevin M. Murphy (1993), ‘A Simple Theory of Advertising as a Good or Bad’
PART II ADVERTISING: INFORMATION AND WELFARE
6. George J. Stigler (1961), ‘The Economics of Information’
7. Lester G. Telser (1964), ‘Advertising and Competition’
8. Phillip Nelson (1970), ‘Information and Consumer Behavior’
9. Phillip Nelson (1974), ‘Advertising as Information’
PART III ADVERTISING AND SEARCH GOODS: THEORY
10. Gerard R. Butters (1977), ‘Equilibrium Distributions of Sales and Advertising Prices’
11. Gene M. Grossman and Carl Shapiro (1984), ‘Informative Advertising with Differentiated Products’
12. Jacques Robert and Dale O. Stahl, II (1993), ‘Informative Price Advertising in a Sequential Search Model’
13. Kyle Bagwell and Garey Ramey (1994), ‘Coordination Economies, Advertising, and Search Behavior in Retail Markets’
PART IV ADVERTISING AND SEARCH GOODS: EMPIRICAL
14. Lee Benham (1972), ‘The Effect of Advertising on the Price of Eyeglasses’
15. John F. Cady (1976), ‘An Estimate of the Price Effects of Restrictions on Drug Price Advertising’
16. John E. Kwoka, Jr. (1984), ‘Advertising and the Price and Quality of Optometric Services’
17. Jeffrey Milyo and Joel Waldfogel (1999), ‘The Effect of Price Advertising on Prices: Evidence in the Wake of 44 Liquormart’
PART V ADVERTISING AND PRODUCT QUALITY INFORMATION: THEORY
18. Richard Schmalensee (1978), ‘A Model of Advertising and Product Quality’
19. Richard E. Kihlstrom and Michael H. Riordan (1984), ‘Advertising as a Signal’
20. Paul Milgrom and John Roberts (1986), ‘Price and Advertising Signals of Product Quality’
21. Mark N. Hertzendorf (1993), ‘I’m Not a High-Quality Firm – But I Play One on TV’
PART VI ADVERTISING AND PRODUCT QUALITY INFORMATION: EMPIRICAL
22. Gerard J. Tellis and Claes Fornell (1988), ‘The Relationship Between Advertising and Product Quality Over the Product Life Cycle: A Contingency Theory’
23. Richard E. Caves and David P. Greene (1996), ‘Brands’ Quality Levels, Prices, and Advertising Outlays: Empirical Evidence on Signals and Information Costs’
24. Louis Thomas, Scott Shane and Keith Weigelt (1998), ‘An Empirical Examination of Advertising as a Signal of Product Quality’
PART VII ADVERTISING AND MARKET STRUCTURE: THEORY
25. Robert Dorfman and Peter O. Steiner (1954), ‘Optimal Advertising and Optimal Quality’
26. A. Michael Spence (1980), ‘Notes on Advertising, Economies of Scale, and Entry Barriers’
27. Richard Schmalensee (1983), ‘Advertising and Entry Deterrence: An Exploratory Model’
28. Kyle Bagwell and Garey Ramey (1988), ‘Advertising and Limit Pricing’
29. Avner Shaked and John Sutton (1987), ‘Product Differentiation and Industrial Structure’
PART VIII ADVERTISING AND MARKET STRUCTURE: EMPIRICAL
30. William S. Comanor and Thomas A. Wilson (1979), ‘The Effect of Advertising on Competition: A Survey’
31. F. Gasmi, J.J. Laffont, Q. Vuong (1992), ‘Econometric Analysis of Collusive Behavior in a Soft-Drink Market’
32. Vrinda Kadiyali (1996), ‘Entry, Its Deterrence, and Its Accommodation: A Study of the U.S. Photographic Film Industry’
33. Margaret E. Slade (1995), ‘Product Rivalry with Multiple Strategic Weapons: An Analysis of Price and Advertising Competition’
34. Timothy F. Bresnahan (1992), ‘Sutton’s Sunk Costs and Market Structure: Price Competition, Advertising, and the Evolution of Concentration’
Name Index
Acknowledgements
Introduction Kyle Bagwell
PART I ADVERTISING: PERSUASION AND WELFARE
1. Nicholas Kaldor (1950), ‘The Economic Aspects of Advertising’
2. Avinash Dixit and Victor Norman (1978), ‘Advertising and Welfare’
3. Carl Shapiro (1980), ‘Advertising and Welfare: Comment’
4. Franklin M. Fisher and John J. McGowan (1979), ‘Advertising and Welfare: Comment’
5. Gary S. Becker and Kevin M. Murphy (1993), ‘A Simple Theory of Advertising as a Good or Bad’
PART II ADVERTISING: INFORMATION AND WELFARE
6. George J. Stigler (1961), ‘The Economics of Information’
7. Lester G. Telser (1964), ‘Advertising and Competition’
8. Phillip Nelson (1970), ‘Information and Consumer Behavior’
9. Phillip Nelson (1974), ‘Advertising as Information’
PART III ADVERTISING AND SEARCH GOODS: THEORY
10. Gerard R. Butters (1977), ‘Equilibrium Distributions of Sales and Advertising Prices’
11. Gene M. Grossman and Carl Shapiro (1984), ‘Informative Advertising with Differentiated Products’
12. Jacques Robert and Dale O. Stahl, II (1993), ‘Informative Price Advertising in a Sequential Search Model’
13. Kyle Bagwell and Garey Ramey (1994), ‘Coordination Economies, Advertising, and Search Behavior in Retail Markets’
PART IV ADVERTISING AND SEARCH GOODS: EMPIRICAL
14. Lee Benham (1972), ‘The Effect of Advertising on the Price of Eyeglasses’
15. John F. Cady (1976), ‘An Estimate of the Price Effects of Restrictions on Drug Price Advertising’
16. John E. Kwoka, Jr. (1984), ‘Advertising and the Price and Quality of Optometric Services’
17. Jeffrey Milyo and Joel Waldfogel (1999), ‘The Effect of Price Advertising on Prices: Evidence in the Wake of 44 Liquormart’
PART V ADVERTISING AND PRODUCT QUALITY INFORMATION: THEORY
18. Richard Schmalensee (1978), ‘A Model of Advertising and Product Quality’
19. Richard E. Kihlstrom and Michael H. Riordan (1984), ‘Advertising as a Signal’
20. Paul Milgrom and John Roberts (1986), ‘Price and Advertising Signals of Product Quality’
21. Mark N. Hertzendorf (1993), ‘I’m Not a High-Quality Firm – But I Play One on TV’
PART VI ADVERTISING AND PRODUCT QUALITY INFORMATION: EMPIRICAL
22. Gerard J. Tellis and Claes Fornell (1988), ‘The Relationship Between Advertising and Product Quality Over the Product Life Cycle: A Contingency Theory’
23. Richard E. Caves and David P. Greene (1996), ‘Brands’ Quality Levels, Prices, and Advertising Outlays: Empirical Evidence on Signals and Information Costs’
24. Louis Thomas, Scott Shane and Keith Weigelt (1998), ‘An Empirical Examination of Advertising as a Signal of Product Quality’
PART VII ADVERTISING AND MARKET STRUCTURE: THEORY
25. Robert Dorfman and Peter O. Steiner (1954), ‘Optimal Advertising and Optimal Quality’
26. A. Michael Spence (1980), ‘Notes on Advertising, Economies of Scale, and Entry Barriers’
27. Richard Schmalensee (1983), ‘Advertising and Entry Deterrence: An Exploratory Model’
28. Kyle Bagwell and Garey Ramey (1988), ‘Advertising and Limit Pricing’
29. Avner Shaked and John Sutton (1987), ‘Product Differentiation and Industrial Structure’
PART VIII ADVERTISING AND MARKET STRUCTURE: EMPIRICAL
30. William S. Comanor and Thomas A. Wilson (1979), ‘The Effect of Advertising on Competition: A Survey’
31. F. Gasmi, J.J. Laffont, Q. Vuong (1992), ‘Econometric Analysis of Collusive Behavior in a Soft-Drink Market’
32. Vrinda Kadiyali (1996), ‘Entry, Its Deterrence, and Its Accommodation: A Study of the U.S. Photographic Film Industry’
33. Margaret E. Slade (1995), ‘Product Rivalry with Multiple Strategic Weapons: An Analysis of Price and Advertising Competition’
34. Timothy F. Bresnahan (1992), ‘Sutton’s Sunk Costs and Market Structure: Price Competition, Advertising, and the Evolution of Concentration’
Name Index
