Beer Advertising and Marketing Update: Structure,Conduct, and Social Costs

Beer advertising is a topic that has frequently attracted the attention of industrial organization economists. This update reviews major events, data trends, and research for each of three issues: (1) the importance of advertising and product differentiation for structural change in the brewing industry; (2) the manner and extent to which brewers can strategically alter market shares using advertising; and (3) the social costs of beer advertising and marketing, including advertising bans, targeting of underage youth, and recent changes in the three-tier system of alcohol distribution. Major legal decisions pertaining to commercial speech and other regulations also are discussed.JEL Classifications: L66, L13, M37     

挪威酒精饮料税收制度改革及其启示

挪威在酒精饮料税收制度方面不但成功地进行了消费税改革,限制了酒精饮料消费,纠正了外部效应,而且还对酒精饮料包装开征了环境税,实施了专款专用政策,平衡酒精饮料消费的私人成本与社会成本,加大违章违法行为惩处力度,并在酒业领域实施专卖制度、许可证制度。这些改革使挪威的酒精饮料税收制度从以税收为基础向以控酒为基础转变,其改革的经验对我国酒精饮料税收制度改革也提供了值得借鉴之处。     

Pricing with Endogenous Direct Advertising in a Monopoly

This paper develops a model of informative advertising in which a firm builds a database using its historical sales records in order to directly target ads on those consumers who have a high probability of purchasing its products. We show that the firm can use this type of direct advertising as a screening mechanism to identify high demand consumers. As a result, direct advertising can work essentially as a device to increase a firm's monopoly power. From a social point of view, this implies that the transition from traditional mass-advertising to direct advertising can generate a trade-off between higher advertising efficiency and greater monopoly power. We compute the model to shed light on the relative strength of these two forces, and find that while direct advertising might have a substantial negative impact on consumers, this advertising technology can only occasionally reduce welfare.     

New concerns on caffeine consumption and the impact of potential regulations: The case of energy drinks

The increasing consumption of energy drinks and caffeine added products, coupled with somewhat inconsistent labeling practices, has generated health concerns from possible excessive caffeine intake. In this paper, we simulate the impacts of potential caffeine content regulatory policies on demand for energy drinks as well as caffeine and sugar consumption. We model demand for energy drinks as a function of price and product characteristics that includes both caffeine levels and the presence of labeled caffeine content. Using our demand estimation results, we simulate the impact of potential policies including mandatory caffeine content labeling, advertising restriction and caffeine content regulations. Results indicate that mandatory labeling and advertising restrictions would reduce the overall sales in the energy drinks sector, but with a limited impact. The effect of caffeine content regulation would vary depending on whether the policy is implemented on a per-ounce basis or a per-can basis. Furthermore, these policies have different impacts on sugar and caffeine consumption, and therefore policymakers should be cautious when implementing caffeine regulations.     

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, 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.     

Search diversion and platform competition

Platforms use search diversion in order to trade off total consumer traffic for higher revenues derived by exposing consumers to unsolicited products (e.g. advertising). We show that competition between platforms leads to lower equilibrium levels of search diversion relative to a monopoly platform when the intensity of competition is high. On the other hand, if there is only mild competition, then competing platforms induce more search diversion relative to a platform monopolist.When platforms charge consumers fixed access fees, all equilibrium levels of search diversion under platform competition are equal to the monopoly level, irrespective of the nature of competition. Furthermore, relative to platforms that cannot charge such fees, platforms that charge positive (negative) access fees to consumers have weaker (stronger) incentives to divert search.     

自然垄断产业规制重构：基于要素演化的视角

在社会经济发展进程中,有形要素的相对比重不断下降,无形要素的相对比重不断提高,两者所起的作用日渐此消彼长。从要素演化的视角对自然垄断产业进行规制重构为规制自然垄断产业提供了新视角和新思路。对有形要素主导型自然垄断产业而言,应以限制性规制为主,避免因无序竞争而带来资源浪费、负外部性扩大,确保有限的有形要素得到充分利用;同时,针对规制过程中出现的风险,要建立规制风险预警机制来加以防范。对无形要素主导型自然垄断产业而言,应以激励型规制为主,放大其本身具有的正外部性;同时,引入竞争机制推动无形要素自身向高级化演进。     

Anti-monopoly issues in Polish telecommunications

Since 1990 the telecommunication sector in Poland has been undergoing rapid development and modernization. It is heavily dominated by Telekommunikacja Polska SA (TP SA), a state-owned company which is split into 10 regional directorates. Although TP SA enjoys a legal monopoly only over international traffic, it is a de facto monopolist in the Polish market too. Apart from difficulties in funding local telephone operations, many of the difficulties facing private competitors to TP SA focus on interconnection and pricing issues. The Anti-monopoly Office, which seeks to restrict unfair competition and restrictive business practices, has been monitoring the compliance of TP SA with the statutory standards. In its business practices TP SA has been reluctant to meet the required standards, particularly these relating to the setting of tariffs. This has been found to have a restrictive effect on the emergence of competition in the form of local operators.     

Advertising,industry innovation,and entry deterrence

With the advent of the Internet and social media platforms, advertising has become cheaper and more effective in reaching consumers. This paper studies the effect of better informative advertising on innovation and industry growth. This paper finds that improvements in informative advertising can lead to costly entry deterrence. Because advertising and innovation are complementary, better advertising raises the threats of entry. When innovation spillover is present in an industry, an incumbent firm has incentives to strategically lower its own innovation to deter entry. As a result, better advertising in innovation-intensive industries can have negative consequences on industry growth and consumer welfare. This paper also investigate the role of innovation spillover on entry deterrence.     

知识经济时代国际贸易理论的变化与发展

知识经济时代,以资源禀赋作为比较优势的古典贸易理论发展成为以知识、技术的动态比较优势;产品差异化程度提高、市场需求的日新月异和全球市场的形成促进了产业内贸易理论和规模经济理论发展;传统的低成本所形成的暂时性垄断竞争发展成为靠知识、技术的结合的“明星效应”垄断;产品生命周期不断缩短,跨国公司“双层网”结构逐渐成熟。     

Does Unemployment Lead to Greater Alcohol Consumption?

Using panel data from Waves 1 and 2 of the NESARC, we estimate gender‐specific effects of changes in employment status on overall alcohol consumption, binge‐drinking episodes, and a diagnosis of alcohol abuse and/or dependence. We employ various fixed‐effects models to address potential bias from unobserved and time‐invariant individual heterogeneity. All results show a positive and significant effect of unemployment on drinking behaviors, and the findings are robust to numerous sensitivity tests. Perhaps, macroeconomic policy decisions intended to stimulate the economy during economic downturns should also consider the avoided personal costs and externalities associated with alcohol misuse.     

The Interaction of Building Codes and Housing Prices

The study analyzes the effect of restrictive building codes on the price of housing, and the simultaneous impact of housing values on the strictness of codes. A model is defined and estimated, using data for more than 1100 localities. The results show that strict codes raised housing values, in 1970, by about one thousand dollars. They furthermore show that the strictness of codes is in turn affected by housing values, as well as by the strength of construction unions. Homeowners and construction unions are thus both observed to gain from restrictive building codes, which can explain the prevalence of such regulations.     

The Effects of Minimum Wages on Low‐Skilled Immigrants’ Wages,Employment, and Poverty

Raising the minimum wage has been advanced as complementary policy to comprehensive immigration reform to improve low‐skilled immigrants’ economic well‐being. While adverse labor demand effects could undermine this goal, existing studies do not detect evidence of negative employment effects. We re‐investigate this question using data from the 1994 to 2016 Current Population Survey and conclude that minimum wage increases reduced employment of less‐educated Hispanic immigrants, with estimated elasticities of around –0.1. However, we also find that the wage and employment effects of minimum wages on low‐skilled immigrants diminished over the last decade. This finding is consistent with more restrictive state immigration policies and the Great Recession inducing outmigration of low‐skilled immigrants, as well as immigrants moving into the informal sector. Finally, our results show that raising the minimum wage is an ineffective policy tool for reducing poverty among immigrants.     

Attorney advertising and the quality of routine legal services

This study examines the relationship between advertising and the quality of three relatively routine legal services. The nature of the services examined made it possible to use attorney time input data to measure output quality. The study's data were collected via attorney surveys conducted in seventeen metropolitan areas across the U.S. The study's findings suggest that advertising and average output quality are inversely related in routine legal service markets. The policy implications of such findings depend critically on the level of offered quality prior to the advent of advertising. If one assumes that attorneys offered inefficiently high levels of service quality to justify their non-competitive prices, then this study's findings suggest that advertising serves to move the average level of quality in the direction of greater efficiency.     

The Role of Competition in Natural Monopoly: Costs, Public Ownership, and Regulation

Conventional policy for industries with very high economies of scale is to permit monopoly but to subject it to regulation or public ownership. Since the latter may not result in cost minimization, however, it is possible that competition, by forcing firms to operate at the cost frontier, may be less costly despite sacrificing some scale economies. The paper sets out the relevant analytical considerations, estimates a cost function for electric distribution utilities in the U.S., and tests for the relative costs of monopoly and duopoly utilities. Among other notable findings, it concludes that competition does indeed lower net costs.     

Economic integration and new firm formation: Britain's impact on Irish enterprise

The paper examines the impact of economic integration on enterprise in a small open economy. The paper analyses large, small and total new company registrations in Ireland. It examines the impact of spill-overs from the United Kingdom labour and product markets on Irish firm formation. The study finds that negative labour market spill-overs dominate positive product market spill-overs so that a net negative effect results from Irish-British economic integration. The results indicate that enterprise in peripheral economies may be more vibrant if product market integration is introduced before labour market integration. The paper also finds enterprise to be positively affected by the number of university graduates in the labour force. House prices are found to have a net negative impact on enterprise.     

Informative Advertising and Optimal Targeting in a Monopoly

This paper analyzes how the transition from mass to specialized advertising can affect the market outcomes. To that end, we consider a particular technology of information transmission which allows a monopolist to decide the optimal targeting strategy. From this starting point, we show that the use of targeted advertising is likely to increase the market price and reduce the level of advertising, and that the degree of media specialization chosen by the monopolist tends to exceed the socially optimal. Furthermore, our model indicates that the social loss resulting from the greater monopoly power might exceed the gain due to the lower wasting of ads, in such a way that targeting could reduce consumer surplus and, what is more important, the level of social welfare.     

Industry self-regulation of food advertisement to children: Compliance versus effectiveness of the EU Pledge

This research examines the effectiveness of the EU Pledge, a self-regulation initiative of leading food companies at the European level, in restricting television advertising of food and drink products high in fat, sugar or salt (HFSS) to children. In October 2011 and 2014, television program of ten German television networks was recorded on a weekday and a weekend day. Data was analyzed using content and regression analysis. Advertised products were examined for their compliance with the nutrient criteria of the EU Pledge and the UK OFCOM nutrient profile model. The sample contains 88 h of advertising with a total of 697 child-targeted food and beverage advertising (CFBA). The results indicate that the number of CFBA broadcasted in television program declined from 2011 to 2014 for both Pledge signatory and non-signatory companies with an overall stronger reduction in children’s compared to non-children’s program. Our findings demonstrate that CFBA broadcasted in children’s program by Pledge members comply by and large with the EU Pledge nutritional criteria in 2014. However, in the same year the probability of CFBA aired by signatory companies in non-children’s program to meet the nutrient profile criteria of the EU Pledge was low. Furthermore, the majority of CFBA of signatory companies do not meet the OFCOM nutritional criteria even in the children’s program. Thus, the effectiveness of the EU Pledge in reducing children’s exposure to child-targeted advertising of HFSS foods and drinks is limited by the focus on children’s program and the relative lenient nutritional criteria agreed on by signatory companies. Based on our results we derive recommendations for industry and policy.     

Input substitutability and vertical integration

Input substitutability in final production is a well-known motive for noncompetitive input producers to integrate with their customers. In models that characterize the noncompetitive input industry as a pure monopoly, whether such integration would increase or decrease final production is ambiguous. The analysis here breaks the total output effect into factor substitution and market power components and discovers that the output ambiguity is sensitive to the specific model of noncompetitive equilibrium assumed. For the empirically most important cases of industrial organization, the sole effect of input substitutability on output is likely to be an unambiguous output increase.For their helpful comments, I am indebted to Stephen Karlson, Li Way Lee, W. G. Shepherd, Stephen Spurr, Hal Varian, and the referee. Any errors in the paper persist in spite of them.     

The ‘Railroad Problem’ and the Interstate Commerce Act

The emergence of railroads presented a problem for the developing economic profession. Railroads, by their very nature, often had a localized monopoly. The check that competition was expected to impose on firm behavior was singularly lacking. At the same time, railroads in the United States were national in scope and thus affected interstate commerce. The Interstate Commerce Act and the Commission spawned by the Act represented the first halting steps towards coping with the monopoly power that was a consequence of the Second Industrial revolution. In this paper, the views of prominent economic and legal thinkers regarding the proper legal framework for railroads are reviewed.