Advertising expenditure and consumer prices

Rauch, Ferdinand (2011) Advertising expenditure and consumer prices. CEP Discussion Papers (CEPDP1073). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

This paper studies the effect of a change in the marginal costs of advertising on advertising expenditures of firms and consumer prices across industries. It makes use of a unique policy change that caused a decrease of the taxation on advertising expenditures in parts of Austria and a simultaneous increase in other parts. Advertising expenditures move immediately in the opposite direction to the marginal costs of advertising. Simultaneously the price reaction to advertising is negative in some industries (food, education) and positive in other industries (alcohol, tobacco, transportation, hotels and restaurants), depending on the information content of advertising. The paper reconciles these findings using a model that contains informative and persuasive forces of advertising.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2011 The Author(s)
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HF Commerce
JEL classification:	H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies M - Business Administration and Business Economics; Marketing; Accounting > M3 - Marketing and Advertising > M37 - Advertising
Date Deposited:	22 Feb 2024 15:57
Last Modified:	22 Feb 2024 15:57
URI:	http://eprints.lse.ac.uk/id/eprint/121734

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