Barry J. Seldon

A Simultaneous Model of Cigarette Advertising: Effects on Demand and Industry Response to Public Policy

A simultaneous demand and advertising system is used to examine the response of aggregate cigarette demand to advertising and the reaction of consumers and industry to government health warnings and media policy during 1952-84. The results indicate that advertising increases demand and that health warnings reduce consumption. The industry reacts to health warnings by increasing its advertising. Copyright 1989 by MIT Press.

Media substitution and economies of scale in advertising

Abstract 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.

The stability of cigarette demand

The relative effects of various governmental interventions upon cigarette consumption is important to policy-makers. Historically, the demand for cigarettes has been quite unstable. Previous studies employ fixed parameter models and use dummy variables associated with interventions to stabilize the demand function. In contrast, we use a varying parameter model aplied to data from the United States for 1953–84 to investigate the stability of demand and show that the demand function is stabilized when dummy variables are employed. Our results suggest that industry advertising increases aggregate consumption while government interventions decrease it. However, the marginal effect of government warnings seems to be small, at least in the US: while the effect of the 1964 health warning is statistically significant, the effect of the 1979 health warning is not.

The fleeting effect of advertising: Empirical evidence from a case study☆

Abstract This paper adds to the evidence that advertising effects depreciate rapidly. Inclusion of lagged advertising in empirical models may be unnecessary. In addition, the notion that accumulated advertising effects may be a barrier to entry is called into question.

The degree of competition in the advertising industry

After a merger wave began among advertising agencies in the late 1960s, the Federal Trade Commission investigated the anticompetitive effects of the mergers and concluded that the industry would remain competitive. In this paper, we employ a method suggested by Bresnahan to investigate the issue of competition in the advertising industry. The method uses industry-level data over the period 1972–87 to consider the determinants of supply and demand for advertising messages and to calculate the degree of market power on the supply side of the market. Statistical results support the hypothesis that the industry was competitive over this period.

Derived demand for advertising messages and substitutability among the media

Abstract We consider market demand for advertising messages through the estimation of a translog cost function for advertising in the economy as a whole over the period 1951–1987. Total advertising is disaggregated into advertising messages in broadcast, print, direct mail, and all other media. We are then able to calculate substitution elasticities among advertising messages in the various media and price elasticities of derived demand in the market for advertising messages. We find that messages in the different media are substitutes in facilitating sales, although the price elasticities suggest that the derived demand curves are rather inelastic.

Input substitution, economies of scale and productivity growth in the US upholstered furniture industry

Cost, factor demand and productivity growth are considered in the upholstered furniture industry over 1958–87. Factors are divided into labour, capital and materials. It is found that all inputs are substitutes in production although substitution elasticities are small. Factor demand is price-inelastic for all inputs. The industry operates around minimum average cost. Productivity growth is small but significant. The results indicate that labour will continue to be important in the industry. However, regional comparative advantage is not related to labour alone; the results suggest that policies to attract or retain the industry must consider the low degree of factor substitution.

Allocating Lobbying Resources between Collective and Private Rents

How do firms allocate their lobbying resources among their political goals? The authors approach this question using a game-theoretic model that integrates three concepts from the lobbying literature: the distinction between private and collective rents, the competition for a rent, and the impacts of political institutions. The model indicates how competition and political institutions affect lobbying expenditures and expected net returns for private and collective lobbying. The outcomes predicted differ with those of past formal models and produce the counterintuitive expectation that competition typically reduces expenditures. The authors test the models predictions by examining the lobbying decisions of sixty-two firms.

A Utility Function Analysis of Competing Models of Party Support

V. O. Keys reward-punishment model has long dominated scholarly thinking about the political economy of party support. The models popularity persists despite anomalous empirical evidence and challenges by issue-priority theorists who criticize the model for ignoring differences in the policy choices offered by competing parties. This paper argues that the reward-punishment and issue-priority perspectives are encompassed by utility function models of voter decision-making. Such models account for party support dynamics that are perverse according to reward-punishment assumptions. They also provide a theoretical rationale for specifying lagged economic effects in party support functions, while suggesting difficulties in doing so. The performance of utility function models is illustrated under varying assumptions about economic conditions and a voters knowledge of them.

The market structure of the US aluminum industry

Abstract New competition from abroad has recently challenged the US aluminum industry. Prices declined and firms faced losses where they previously realized profits. Perhaps these phenomena represent structural change in an industry that previously enjoyed market power. Alternatively, perhaps the industry had already lost its market power, at least since the 1950s, when Reynolds and Kaiser broke Alcoas dominant-firm status. If so, the recent losses may reflect heightened global competition in an already competitive market. We estimate market power in the US aluminum industry over 1965–1988 and find evidence that the industry was competitive over this period.