Megan McArdle has been writing about the wisdom of the anti-obesity crusade. A number of anti-obesity activists blame television advertising, and suggest that we ban it. My sense is that firms would welcome an advertising ban, as it would amount of multilateral disarmament. A study by Massimo Motta suggests that an advertising ban might actually increase total consumption.

This paper shows that an advertising ban is more likely to increase – rather than decrease – total consumption when advertising does not bring about a large expansion of market demand at given prices and when it increases product differentiation (thus allowing firms to command higher prices). In this case, the main impact of a ban on advertising is to reduce equilibrium prices and thus increase demand. It is argued that this is more likely to happen in mature industries where consumer goods are ex-ante (i.e. without advertising) similar and advertising is of the ‘persuasive’ type. The ban is more likely to increase firms’ profits the weaker the ability of advertising to expand total demand and the less advertising serves to induce product differentiation.

It’s worth wondering whether advertising has really driven a large expansion of market demand. One could argue that the market for fast food is saturated, and that, as McArdle suggests, advertising is used to create new product awareness and to encourage brand switching.