Schwachstellen der Werbeselbstkontrolle: Aufgezeigt am Beispiel des Deutschen Werberats

Weaknesses of advertising self-control: The case of the “Deutscher Werberat» (German Advertising Council, DWR). The paper scrutinizes the activities of DWR, the most important self-regulatory institution of German advertising business, founded in 1972. Its ten members come from the industry, the media, and the advertising agencies and professions. Consumers are not represented on the board; there is only a committee for co-ordinating contacts with the leading German organization, namely Arbeitsgemeinschaft der Verbraucher. DWR invites complaints from everybody about indecent, misleading, and unfair advertising. The main guideline of DWR is the code of the International Chamber of Commerce, the ICC Rules. DWR has hardly any possibilities to sanction those firms that infringe the rules; it can ask for only voluntary compliance with its opinions. In order to understand how DWR really works, the author examined advertisements in different German magazines (e. g.,Stern, Der Spiegel) from June 1976 to December 1978. For about 320 of those, published by well-known German and foreign firms, he filed complaints to DWR because of alleged contravention of advertising rules. They constituted a large part of the complaints received by DWR since in total, the Council dealt with about 670 complaints during that period. 73.9% of the author's complaints were not accepted by DWR (see Table 1 of the paper). The following weak points of the self-controlling system were discovered:

1. Complaint handling takes an extraordinary long time: an average of 32 days for complaints which were successfully filed (see Table 2). This means that a suspect advertisement can appear for quite some time before it is stopped by the opinion of DWR.
2. There are, in the view of the author, many wrong decisions, especially in cases of misleading advertising (ambiguous, hyperbolical, incomplete, untrue claims). Fifty-two of the advertisements which had been judged acceptable by DWR could be stopped with the help of other institutions.
3. The procedure of complaint handling gives cause for criticism, for instance, in cases of ambiguity, interpretations usually favour the advertiser. Of the complainant, DWR demands proof that an advertiser's claim is untrue, whereas the advertiser remains in the clear if he makes some vague statements to the effect that the claim is true or the complainant's arguments are incorrect.

The author concludes by making some proposals for reform of the self-regulatory system and for the increase of its efficiency. In his opinion, self-regulation does not exclude government intervention in advertising, however.     

Möglichkeiten für eine präventive und breitenwirksame Verbraucherberatung durch die Verbraucherzentralen

Journal of Consumer Policy - Der Beitrag stellt einen Vorschlag über Möglichkeiten der Erweiterung der Rechtsberatung durch die Verbraucherzentralen in Richtung auf eine Erhöhung von...     

Risk preferences estimation of exporting firms under exchange rate uncertainty

This note empirically analyses how exchange rate fluctuations affects firms’ optimal production and exporting decisions. A firm’s elasticity of risk aversion determines the direction of the impact of exchange rate risk on exports. Based on a flexible utility function that incorporates all possible risk preferences, a unique structurally estimable equation is derived. Quantile regression method is used to estimate this equation and compute the risk aversion elasticities for a panel of Indian firms. This approach allows us to demonstrate how characteristics of exporters at the intensive margin varies with the level of elasticities across the conditional exchange rate distribution.     

The Impact of Regret on Exports

We examine optimal production and export decisions of a firm facing exchange rate uncertainty, where the firm's management is not only risk averse but also regret averse, i.e., is characterized by a utility function that includes disutility from having chosen ex post suboptimal alternatives. Experimental and empirical results support the view that managers tend to be regret averse. Under regret aversion a negative risk premium need not preclude the firm from exporting which would be the case if the firm were only risk averse. Exporting creates an implicit hedge against the possibility of regret when the realized spot exchange rate turns out to be high. The regret‐averse firm as such has a greater ex ante incentive to export than the purely risk averse firm. Finally, we use a two‐state example to illustrate that the firm optimally exports more (less) to the foreign country than in the case of pure risk aversion if the low (high) spot exchange rate is more likely to prevail. Regret aversion as such plays a crucial role in determining the firm's optimal allocation between domestic sales and foreign exports.     

Open‐shop unions and product market competition

Abstract Evidence on the effect of product market competition on unionized wages is mixed. In this paper we show theoretically that the result may reflect genuine heterogeneity in the response of union wages to product market conditions. For low levels of unionization, union bargaining power may actually be enhanced by market competition, as firms have more to lose when there is a strike. Using recent data from the UK, we explore interactions between the level of industry competition and unionization, and find supporting evidence for this hypothesis.     

Tari–tax reforms and market access

Reducing taris and increasing consumption taxes is a standard IMF advice to countries that want to open up their economy without hurting government finances. Indeed, theoretical analysis of such a tari–tax reform shows an unambiguous increase in welfare and government revenues. The present paper examines whether the country that implements such a reform ends up opening up its markets to international trade, i.e. whether its market access improves. It is shown that this is not necessarily so. We also show that, comparing to the reform of only taris, the tari–tax reform is a less efficient proposal to follow both as far as it concerns market access and welfare.     

The welfare effects of entry: the role of the input market

In a successive Cournot oligopoly, we show the welfare effects of entry in the final goods market with no scale economies but with cost difference between the firms. If the input market is very concentrated, entry in the final goods market increases welfare. If the input market is not very concentrated, entry in the final goods market may reduce welfare if the entrant is moderately cost inefficient. Hence, entry in the final goods market is more desirable if (1) the input market is very concentrated or (2) the cost difference between the incumbents and the entrant is either very small or very large. It follows from our analysis that entry increases the profits of the incumbent final goods producers if their marginal costs are sufficiently lower than the entrant’s marginal cost.