TY - JOUR
T1 - The effect of price advertising on prices
T2 - Evidence in the wake of 44 Liquormart
AU - Milyo, Jeffrey
AU - Waldfogel, Joel
PY - 1999/12
Y1 - 1999/12
N2 - The 44 Liquormart decision, eliminating Rhode Island's ban on liquor price advertising, made Rhode Island the subject of a natural experiment for measuring the effect of advertising on prices. Using Massachusetts prices as controls we find that advertising stores substantially cut only prices of the products that they advertise Prices of other products, at both advertising and nonadvertising stores, do not change. Advertising stores cut their prices on products advertised by rivals, while nonadvertising stores do not. We find no reductions in price dispersion across stores. Newspaper-advertising stores appear to draw a higher share of customers after they advertise. (JEL L11, L51, L66).
AB - The 44 Liquormart decision, eliminating Rhode Island's ban on liquor price advertising, made Rhode Island the subject of a natural experiment for measuring the effect of advertising on prices. Using Massachusetts prices as controls we find that advertising stores substantially cut only prices of the products that they advertise Prices of other products, at both advertising and nonadvertising stores, do not change. Advertising stores cut their prices on products advertised by rivals, while nonadvertising stores do not. We find no reductions in price dispersion across stores. Newspaper-advertising stores appear to draw a higher share of customers after they advertise. (JEL L11, L51, L66).
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U2 - 10.1257/aer.89.5.1081
DO - 10.1257/aer.89.5.1081
M3 - Article
AN - SCOPUS:0000601655
SN - 0002-8282
VL - 89
SP - 1081
EP - 1096
JO - American Economic Review
JF - American Economic Review
IS - 5
ER -