Media substitution and economies of scale in advertising

Two important issues in the economics of advertising are media substitutability in generating sales and scale economies in advertising. If media are substitutes then partial bans, e.g., broadcast bans on cigarettes or alcoholic beverages, may be ineffective; and mergers among radio and TV firms, cur...

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Bibliographic Details
Published in:International journal of industrial organization 2000-12, Vol.18 (8), p.1153-1180
Main Authors: Seldon, Barry J., Jewell, R.Todd, O’Brien, Daniel M.
Format: Article
Language:English
Subjects:
Advertising
Advertising bans
Beer
Economic size
Economies of scale
Marketing
Media
Media substitution
Returns to scale
Studies
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Summary:Two important issues in the economics of advertising are media substitutability in generating sales and scale economies in advertising. If media are substitutes then partial bans, e.g., broadcast bans on cigarettes or alcoholic beverages, may be ineffective; and mergers among radio and TV firms, currently widespread in the U.S. and Mexico, are unlikely to result in market power in setting advertising rates. If there are scale diseconomies in advertising, concerns that advertising increases entry barriers may be unfounded. Using U.S. beer firm data over 1983:Q1–1993:Q4 for three media categories, we find evidence of high substitutability and diseconomies of scale.
ISSN:0167-7187
1873-7986
DOI:10.1016/S0167-7187(99)00010-7