A Survey of Advertising and Market Structure.

The economics of advertising is marked by the same emotional commitment to conflicting schools of thought that is usually associated with monetary theory and the economics of speculation. To all appearances, the choice of both the axioms used and data to be interpreted has been made in order to justify preexisting conclusions rather than to make an unbiased test between alternative theories. The controversies endure in large part because advertising still remains outside the core of accepted theory. Neither the standard Marshallian partial equilibrium analysis nor the Arrow-Debreu general equilibrium analysis even admits the existence of advertising. Two major explanations of advertising are widely held: one considers advertising as a set of psychological ploys which induce consumers to buy products or brands that they otherwise would not buy; the other treats advertising as a provision of information which allows consumers to make more discriminating choices within the framework of a fixed set of preferences.