advertising
Nowadays, advertising is a very big business. Very often is the major means of competing among firms. Furthermore, supporters of advertising claim that it brings specific benefits for consumers. First off all, they claim that advertising provide information to consumers about the quality or the availability of several products. This is very important for consumers because they do not waste time for searching (search costs). If we suppose, that consumers want to shop at the lowest price shop but, they do not know which is the store with the lowest prices, then they gather information by reading and watching advertisements and TV commercials respectively or by visiting several stores. This action of consumers makes prices to fall, but only if consumers have the appropriate information. Otherwise the prices may rise. Supporters of advertising also claim that advertising may encourage price competition among the firms, if prices feature significantly in the advertisement. In addit!ion to this, by increasing sales through advertising, firms can gain economies of scale, which means that it will help to keep prices down. As we can understand information is very essential for consumers, not only because it lowers the prices, but also be
ntifraud laws. Let's take an example to understand better what Antifraud laws are. "Suppose that the law prohibits the misleading of the fabric content of clothing. If the law is always enforced, consumers believe that a clothing label is usually correct, thereby giving a manufacture an incentive to mislead. On the contrary, in the absence of any enforcement consumers do not trust clothing labels and as a result firms have little incentive to mislead". (Statement taken from Carlton and Perloff) The question that may arise here is if we have to enforce these laws or not. It is not so simple to answer this question. As I noted above we have to use Antifraud laws properly if we want to increase consumer's information. This means that the optimal level of enforcement lies somewhere in the middle range between no enforcement at all and enforcement of those laws. Furthermore we can use Disclosure laws in order to stop misleading advertising. This set of laws "require firms to reveal! e". Lying advertising called and "hit and run" advertising as well. This is a real problem for producers who know that their products are good. The only thing that they can do in order to overcome this difficulty is to raise the "stakes and commit a lot of money to advertising". It is easy to understand here, that this can make sense only if they expect their product to be successful for a very long time, long enough for the consumers to find out that the product is really good. Furthermore, there are some goods that usually they are not going to be replaced for a decade or more (once-o
Some common words found in the essay are:
, Philip Morris, Furthermore Disclosure, Carlton Perloff, American Brands, quality products, firms advertise, consumer's information, Advertising Percent, philip morris, information products, products consumers, quality products consumers, improve consumer's information, information means, noted advertising, information quality products, gather information, appropriate information, consumer's information quality, supporters advertising claim,
Approximate Word count = 1059
Approximate Pages = 4 (250 words per page double spaced)
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