Advertising Restrictions as Rent Increasing Costs

Authors:
John R. Morris and James A. Langenfeld
Working Paper:
196

This paper develops more general conditions for identifying when a cost increase may be profitable for incumbent firms. Given those conditions, it then shows that advertising restrictions can act as rent increasing costs and raise the profits of association members.  As with previous theories, prices increase as a result of the  advertising restrictions. But in contrast with common intuition, measured output actually may increase with restrictions.