Does government-sponsored advertising increase socialwelfare? atheoretical and empirical investigation

Carlos E. Carpio, Olga Isengildina-Massa

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

The main objective of this study was to analyze the effect of advertising on social welfare in a perfectly competitive market where the level of advertising is chosen by a social planner. The theoretical model revealed that social plannersponsored advertising that increases the equilibrium price of the advertised good can increase society's welfare if the effect of advertising in consumers' utility is higher than the consumer welfare-reducing price effect. The empirical illustration focuses on the U.S. state of South Carolina's "buy local" food products campaign. The findings suggest that this government-sponsored advertising campaign increases total welfare.

Original languageEnglish
Pages (from-to)239-259
Number of pages21
JournalApplied Economic Perspectives and Policy
Volume38
Issue number2
DOIs
StatePublished - 2016

Keywords

  • Complementary advertising
  • Contingent valuation
  • Local foods
  • Taste-shifting advertising

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