Comments on "The Impact of Advertising on the Price of Consumer Products"

Abstract

I applaud the author's efforts to present theoretical work from the industrial organization area of economics rs to readers of a marketing journal. The authors focus on the effects of advertising on price elasticity of demand and on price levels.l Unfortunately, in their survey of the empirical studies on whether advertising increases prices, Farris and Albion fail to uestnderstand that those that argue that advertising increases prices lack both theory and facts. Also, their discussion of the role of advertising in the process of consumer choice is seriously incomplete. The answer to the question, Does advertising increase prices?, is no. Those who argue the opposite lack understanding of economic theory and have not clearly recognized the difference between money price and real price, including search costs and alteration costs.2 Fundamentally, advertising cannot increase prices even though it involves the