THE ECONOMIC ANALYSIS OF ADVERTISING
KYLE BAGWELL
Columbia University
Contents
Abstract 1703
Keywords 1703
1. Introduction 1704
2. Views on advertising 1708
2.1. Setting the stage 1708
2.2. The persuasive view 1710
2.3. The informative view 1716
2.4. The complementary view 1720
2.5. Summary 1723
2.5.1. Combative advertising 1724
2.5.2. Persuasion and consumption distortions 1724
2.5.3. Joint supply 1724
2.5.4. Brand loyalty, advertising scale economies and market power 1724
3. Empirical regularities 1725
3.1. The direct effects of advertising 1726
3.1.1. Sales 1726
3.1.2. Brand loyalty and market-share stability 1729
3.1.3. Advertising scale economies 1731
3.2. The indirect effects of advertising 1734
3.2.1. Concentration 1734
3.2.2. Profit 1737
3.2.3. Entry 1741
3.2.4. Price 1743
3.2.5. Quality 1746
3.3. Summary 1748
4. Monopoly advertising 1749
4.1. The positive theory of monopoly advertising 1749
4.1.1. The Dorfman–Steiner model 1749
Handbook of Industrial Organization, Volume 3
Edited by M. Armstrong and R. Porter