Issues in Advertising: The Economics of Persuasion

By David G. Tuerck | Go to book overview
Save to active project

TOWARDS A THEORY OF THE
ECONOMICS OF ADVERTISING

Lester G. Telser


Introduction

Advertising remains a challenging problem for economic theory for several reasons. First, the ordinary assumption that tastes are given does not serve us well for advertised products. We are forced to pay attention to the effects of what people know about products that they buy. The simplifying assumption of elementary economic theory focuses attention on price alone for commodities of known virtues or vices. To understand advertising we must reckon with the fact that a person's stock of knowledge about goods and services influences his preferences. It is, therefore, useful to assume given tastes only if the stock of knowledge is given. Under these circumstances, when the stock of knowledge changes, the theory that takes this into account will furnish better predictions of behavior.

Second, although advertising is a joint product that goes together with some physical good or service, it is not literally tied to the good or service. To illustrate, buttons and coats are normally tied together to make a joint product. Since different coats are made with different numbers of buttons, one can calculate a derived demand for buttons and a derived demand for coats separately. In these respects alone there is no substantial difference between advertising and coat buttons. The distinction lies in this. When someone buys a coat he pays for both the coat and the buttons. With advertising this is not generally true. There are people who may receive the benefits of advertising messages without facing the burden of paying for the advertising. There are also people who pay for the advertising when they buy the advertised good or service who do not necessarily benefit from the advertising because whatever information it contains is redundant to these buyers. This, however, begs the question of why they do not buy some equivalent good or service that is not advertised at all or is less advertised and in

____________________
I wish to thank Yale Brozen, Milton Friedman, Harry Johnson, Sam Peltzman, and George Stigler for their helpful comments on an earlier draft of this paper. I assume responsibility for all errors herein.

-71-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited page

Bookmark this page
Issues in Advertising: The Economics of Persuasion
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen
/ 286

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?