Abstract
We develop a dynamic equilibrium model of firm competition to analyze the effects of counterfactual policies, such as taxes and advertising restrictions, on pricing, advertising, consumption, and welfare. Using micro-level data, we estimate how consumer exposure to television commercials influences product choice and model firms' strategic competition over advertising budgets and pricing. We exploit firms' practice of delegating advertising slot decisions to agencies to link consumer-level advertising variation to firms' strategic choices. Our results show that a sugar-sweetened beverage tax reduces advertising, while the additional impact of advertising restrictions is signicantly weaker when a tax is already in place.
Keywords
taxation, advertising, discrete choice demand, dynamic oligopoly;
JEL codes
- D12: Consumer Economics: Empirical Analysis
- H22: Incidence
- I18: Government Policy • Regulation • Public Health
- M37: Advertising
Reference
Pierre Dubois, Rossi Abi Rafeh, Rachel Griffith, and Martin O'Connell, “The Effects of Sin Taxes and Advertising Restrictions in a Dynamic Equilibrium”, TSE Working Paper, n. 23-1480, October 2023, revised February 2025.
See also
Published in
TSE Working Paper, n. 23-1480, October 2023, revised February 2025