Cigarette advertising, price and social welfare : empirical evidence Public Deposited

http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/nv9356501

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  • This study estimates the welfare effects of cigarette advertising using the framework posited by Becker and Murphy (1993). This model exposes previously unaccounted benefits of cigarette advertising and allows for conventional social welfare estimation by assimilating the theory of advertising into the general theory of complements. The policy implications of the Becker and Murphy framework will rely on the impact of advertising on equilibrium output price. A modification of the new empirical industrial organization technique allows estimation of a supply relation containing advertising in an imperfectly competitive environment. Allowing for different price effects of cigarette advertising before and after the Broadcast Advertising Ban leads to the conclusion that advertising after the ban has a larger price effect than before. This suggests that cigarette advertising is better able to enhance market power after the Broadcast Advertising Ban. Parameter estimates indicate that a one percent increase in cigarette advertising above its 1994 level will precipitate a conservative estimate of a reduction in social welfare of $14.3 million (in 1982 dollars). Thus, even if one ignores externalities altogether, cigarette advertising is clearly excessive from society's point of view.
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  • File scanned at 300 ppi (Monochrome) using Capture Perfect 3.0 on a Canon DR-9050C in PDF format. CVista PdfCompressor 4.0 was used for pdf compression and textual OCR.
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