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. / Graduation date: 1997
| Identifer | oai:union.ndltd.org:ORGSU/oai:ir.library.oregonstate.edu:1957/34027 |
| Date | 11 April 1997 |
| Creators | Farr, Stephen J. |
| Contributors | Tremblay, Victor J. |
| Source Sets | Oregon State University |
| Language | en_US |
| Detected Language | English |
| Type | Thesis/Dissertation |
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