The Effects of Sin Taxes and Advertising Restrictions in a Dynamic Equilibrium

Pierre Dubois, Rossi Abi Rafeh, Rachel Griffith and Martin O'Connell

No 23-1480, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We develop a dynamic equilibrium model of firm competition to analyze the effects of counterfactual policies, such as taxes and advertising restrictions, on pricing, advertising, consumption, and welfare. Using micro-level data, we estimate how consumer exposure to television commercials influences product choice and model firms' strategic competition over advertising budgets and pricing. We exploit firms' practice of delegating advertising slot decisions to agencies to link consumer-level advertising variation to firms' strategic choices. Our results show that a sugar-sweetened beverage tax reduces advertising, while the additional impact of advertising restrictions is signicantly weaker when a tax is already in place.

Keywords: taxation; advertising; discrete choice demand; dynamic oligopoly (search for similar items in EconPapers)
JEL-codes: D12 H22 I18 M37 (search for similar items in EconPapers)
Date: 2023-10-16, Revised 2025-02
New Economics Papers: this item is included in nep-com, nep-dcm, nep-gth and nep-pub
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Related works:
Working Paper: The Effects of Sin Taxes and Advertising Restrictions in a Dynamic Equilibrium (2025)
Working Paper: The Effects of Sin Taxes and Advertising Restrictions in a Dynamic Equilibrium (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:128618

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