Advertising Bans

Massimo Motta ()

No 1613, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper shows 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. It is argued 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 more likely to increase firms’ profits the weaker the ability of advertising to expand total demand and the less advertising serves to induce product differentiation.

Keywords: Advertising; Alcohol; Bans; Product Differentiation; Regulation; Tobacco (search for similar items in EconPapers)
JEL-codes: K2 L13 M37 (search for similar items in EconPapers)
Date: 1997-04
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Advertising bans (2013)
Working Paper: Advertising bans (1997)
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