Media substitution and economies of scale in advertising

Two important issues in the economics of advertising are media substitutabi lity in generating sales and scale economies in advertising. If media are s ubstitutes then partial bans, e.g., broadcast bans on cigarettes or alcohol ic beverages, may be ineffective; and mergers among radio and TV firms, cur rently widespread in the U.S. and Mexico, are unlikely to result in market power in setting advertising rates. If there are scale diseconomies in adve rtising, concerns that advertising increases entry barriers may be unfounde d. Using U.S. beer firm data over 1983:Q1-1993:Q4 for three media categorie s, we find evidence of high substitutability and diseconomies of scale. (C) 2000 Elsevier Science B.V. All rights reserved.