Advertising and Market Concentration

Greer, Douglas F.

doi:10.2307/1056065

Cited by 84 publications

(36 citation statements)

References 13 publications

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“…Thus, our findings support the linear specification used by Kambhampati (1996) and DKKV and we reject the hypothesis of an inverted U shape effect suggested by Greer (1971), Cable (1972), and Strickland and Weiss (1976). Advertising is also found to be explained by past price-cost margins.…”

supporting

confidence: 88%

“…Although our modeling framework follows closely to that of DKKV, at least four major differences are noteworthy: 3. Concentration on advertising: Following Greer (1971), Cable (1972), and Strickland and Weiss (1976), we examine whether the effect of concentration on advertising takes an inverted-U shape. DKKV restricted their model to consider only a linear relationship.…”

Section: Study Focusmentioning

confidence: 99%

“…Previous year's profits are expected to have impacts on current advertising expenditure; i.e., the more past profits, the more current advertising outlays. In Greer (1971), Cable (1972), Comanor and Wilson (1974), and DKKV, the growth of sales is incorporated to control for successful new product development, positive demand shocks and/or greater levels of advertising induced product differentiation. The coefficients b 1 and b 2 , are expected to be positive.…”

Section: The Modelmentioning

confidence: 99%

“…The coefficients b 1 and b 2 , are expected to be positive. As investigated in Greer (1971), Cable (1972), and Strickland and Weiss (1976), the effect of concentration on advertising takes an inverted U shape. Advertising is expected to be increasing in concentration when concentration ratio is low (Dorfman & Steiner, 1954), but decreasing at very high levels of concentration when it becomes easier for firms to collude to avoid mutually offsetting advertising.…”

Section: The Modelmentioning

confidence: 99%

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Structural change and market power in the U.S. food manufacturing sector

2009

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This study develops an intertemporally linked market model to explore the relationships between price-cost margins, market concentration, and advertising outlay. The study used data from 48 four-digit SIC (standardized industrial classification) codes for the Food and Tobacco Processing Industries during the 1970s, 1980s, and 1990s. The authors' findings provide evidence that both high and low levels of performance provide signals to industries to consolidate, but for obvious and different reasons. Further, increased consolidation leads to increased entry barriers (advertising) and higher profits to the industry. Our findings are supportive of both Chicago and Traditionalist Schools of thought about antitrust enforcement: Neither emerges in a dominant position. Endogeneity issues and findings within the intertemporal structure cast considerable doubt about overly simplistic structure-performance paradigms of firm behavior. [JEL Code: L11, L40, L66]. r

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supporting

confidence: 88%

Section: Study Focusmentioning

confidence: 99%

Section: The Modelmentioning

confidence: 99%

Section: The Modelmentioning

confidence: 99%

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Structural change and market power in the U.S. food manufacturing sector

2009

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“…1 One reason may be that the empirical literature on collusion and advertising o¤ers somewhat mixed …ndings. 2 Ferguson (1974) argues that advertising activity is publicly observable and thus that collusion in advertising is feasible; and Cable (1972), Greer (1971) and Sutton (1974) emphasize the possibility of collusion in advertising among …rms in highly concentrated markets, in their interpretations of the empirical relationship between advertising and concentration. Simon (1970) and Scherer (1980), however, argue that advertising activities are di¢ cult to assess and monitor, and thus suggest that collusion in advertising may be di¢ cult to achieve.…”

Section: Introductionmentioning

confidence: 99%

Advertising Collusion in Retail Markets

Bagwell¹,

Lee²

2010

The B.E. Journal of Economic Analysis &Amp; Policy

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We consider non-price advertising by retail …rms that are privately informed as to their respective production costs. We …rst analyze a static model. We construct an advertising equilibrium, in which informed consumers use an advertising search rule whereby they buy from the highest-advertising …rm. Consumers are rational in using the advertising search rule, since the lowest-cost …rm advertises the most and also selects the lowest price. Even though the advertising equilibrium facilitates productive e¢ ciency, we establish conditions under which …rms enjoy higher expected pro…t when advertising is banned. Consumer welfare falls in this case, however. We next analyze a dynamic model in which privately informed …rms interact repeatedly. In this setting, …rms may achieve a collusive equilibrium in which they limit the use of advertising, and we establish conditions under which optimal collusion entails pooling at zero advertising. More generally, full or partial pooling is observed in optimal collusion. In summary, non-price advertising can promote product e¢ ciency and raise consumer welfare; however, …rms often have incentive to diminish advertising competition, whether through regulatory restrictions or collusion.

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The intensity of advertising and other selling expenses in food and tobacco manufacturing: Measurement, determinants, and impacts

Connor

Weimer

1986

Agribusiness

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The measurement of selling effort in the food processing industries has improved in several ways. An FTC data set on both advertising and promotional expenses is used to estimate some determinants of variations in the intensity of selling effort. They are found to be related to market sales concentration, the number of brands being sold, elaborateness of packaging, and product perishability. A second analysis finds that the intensity of food-manufacturer selling efforts is nonnegatively associated with grocery wholesalers' or retailers' gross margins. The latter finding challenges the view that manufacturer advertising provides information that ultimately benefits consumem through lower retail prices.The size of selling costs plays a central role in the theory and testing of the basic paradigm of industrial-organization economics.' Advertising-to-sales ratios (advertising intensity) are nearly universally employed in empirical studies as proxies for the degrees of product differentiation across brands within industries,

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Advertising and Market Concentration

Cited by 84 publications

References 13 publications

Structural change and market power in the U.S. food manufacturing sector

Structural change and market power in the U.S. food manufacturing sector

Advertising Collusion in Retail Markets

The intensity of advertising and other selling expenses in food and tobacco manufacturing: Measurement, determinants, and impacts

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