Handbook of Media Economics, vol 1A

advertising change consumer behavior without changing tastes. Then, although adver-

tising may have some social value in an imperfectly competitive market, by raising output

it is clearly over-provided in equilibrium.

68

That persuasive advertising by a monopolist

is excessive remains valid under fairly general conditions, even if welfare is measured

using the post-advertising tastes. However, similar conditions also imply that the provi-

sion of quality information through informative advertising is excessive. By contrast,

informative advertising by a monopolist that makes consumers aware of the product’s

existence and attributes is clearly insufficient.

69

Allowing for consumer naivety is a natural way of explaining why ads do not inform

consumers