The Economic Effects of Proposed Regulation of TV Advertising Directed at Children: A Theoretical and Empirical Analysis

Abstract

This thesis theoretically and empirically examines the economic effects of past and proposed reductions in children directed TV advertising on the consumers and producers of children's products. The history and nature of the proposals to ban children directed advertising is presented, and then theoretical models of advertising for the profit maximizing firm are developed for both the independent firm and the firm that operates in the duopoly setting. The comparative static properties of the models produce interesting results that show the conditions in which advertising restrictions lead to increases or decreases in product prices and product availability. The concept of interdependence in advertising is presented in a unique mathematical and graphical form. Finally, empirical attention focuses on the market for breakfast cereals. It examines the effectiveness of TV advertising in altering aggregate cereal sales and the effect that past reductions in cereal advertising had on cereal industry sales and profits.