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Does Government Sponsored Advertising Increase Social Welfare? A Theoretical and Empirical Investigation

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  • Carpio, Carlos E.
  • Isengildina-Massa, Olga

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 planner sponsored 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 (producer welfare is increased by the same amount as the reduction in consumer welfare). The empirical illustration focuses on the U.S. state of South Carolina “buy local” food products campaign. The findings suggest that this government sponsored advertising campaign increases total welfare.

Suggested Citation

  • Carpio, Carlos E. & Isengildina-Massa, Olga, 2013. "Does Government Sponsored Advertising Increase Social Welfare? A Theoretical and Empirical Investigation," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149835, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea13:149835
    DOI: 10.22004/ag.econ.149835
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    Cited by:

    1. Dobbs, Leah Moore & Jensen, Kimberly L. & Leffew, Megan Bruch & English, Burton C. & Lambert, Dayton M. & Clark, Christopher D., 2016. "Consumer Willingness to Pay for Tennessee Beef," Journal of Food Distribution Research, Food Distribution Research Society, vol. 47(2), pages 1-24, July.
    2. Dobbs, Leah & Jensen, Kimberly & Leffew, Megan & English, Burton & Lambert, Dayton & Clark, Christopher, 2015. "Willingness to Pay for Tennessee Beef among Tennessee Consumers," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196672, Southern Agricultural Economics Association.
    3. J. K. Pappalardo, 2022. "Economics of Consumer Protection: Contributions and Challenges in Estimating Consumer Injury and Evaluating Consumer Protection Policy," Journal of Consumer Policy, Springer, vol. 45(2), pages 201-238, June.
    4. Jasper Grashuis & Ye Su, 2022. "Inequality aversion and consumer ethnocentrism: Food consumer preferences for payoff distributions to farm producers," Agribusiness, John Wiley & Sons, Ltd., vol. 38(3), pages 608-619, July.

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    More about this item

    Keywords

    Agricultural and Food Policy; Consumer/Household Economics; Demand and Price Analysis; Marketing;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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