Advertising and Consumer Welfare: Scaling versus Translating

Julian Alston, James A. Chalfant and Nicholas Piggott

No 135411, 1997 Conference (41st), January 22-24, 1997, Gold Coast, Australia from Australian Agricultural and Resource Economics Society

Abstract: Controversy has surrounded the welfare effects of advertising, mainly concerning the consumer welfare effects. Unfortunately, the measures of consumer welfare effects in most studies have been ad hoc and incorrect. The consumer welfare consequences of advertising can be measured consistently when consumer demand equations are derived from an expenditure function. This is illustrated using the Almost Ideal demand system, which is popular in econometric estimation of food demand systems. An empirical application uses data on Australian meat consumption to evaluate generic advertising of meats. The results from using a theoretically correct money-metric measure of consumer welfare effects, taking account of cross-commodity effects of advertising and price changes, are compared with ad hoc approaches that some previous studies have proposed. In addition, the consumer welfare measures are combined with measures of producer benefits in order to compute private and social returns.

Keywords: Demand; and; Price; Analysis (search for similar items in EconPapers)
Pages: 26
Date: 1997-01-17
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aare97:135411

DOI: 10.22004/ag.econ.135411

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