A NOTE ON MEASURING RETURNS TO GENERIC ADVERTISING IN INTERRELATED MARKETS

This note focuses on the theoretical relationship between price and ge neric advertising when supply is uncontrolled and markets are Interrel ated through consumer preferences. A key finding is that the mutatis m utandis relationship between own-price and own-advertising is indeterm inate unless the structural elasticities pertaining to own-price and o wn-advertising effects are greater in absolute value than the correspo nding cross elasticities. This implies, inter alia, that benefit-cost analyses based on single-equation models may overstate producer return s to generic advertising, a conclusion verified in the empirical appli cation.