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The concept of advertising does not require that the ad viewer "overpay" for the product of the advertiser. It only requires that in the long run, the average a

The concept of advertising does not require that the ad viewer "overpay" for the product of the advertiser. It only requires that in the long run, the average additional revenue for the company is greater than the average cost of the ad. If Alice spends $1 to show an ad to Bob, who then spends $2 on $product (which has 0 marginal cost to Alice), which is so wonderful that Bob obtains $3 of value from it, everyone is a winner. Lots of ads try to convince the viewer to spend money on something not in their best interest, but it is not inherent to the vehicle of advertising that this be so.

pacala 13y ago
You assume that Alice is the sole provider of the product, which is by and large false. In practice Alice shows an ad to Bob at the $2 price point, while Claire and Darcy have the same product for $0.5. Furthermore, Alice creates an entire marketing literature designed to obfuscate the fact that Claire and Darcy products are the exact same product, at times produced by the exact same manufacturing plant. Bob doesn't have enough time to cut through the bullshit, so never learns about Claire or Darcy, and ends up overpaying $1.50, which is then split $.50 to the marketing department of Alice, $.50 to ADVERT_CO and $.50 to Alice's shareholders. PS. The "value" that B derives from the product is not quantifiable within the orthodox economic framework, as "value" is an arbitrary number that can only be determined by a buyer meeting a seller's price in a competitive market.
- gabemart 13y ago
  Alice may well be the sole provider of the product. This is especially true in the realm of products with zero marginal costs. Even if we assume she is not, and that a fungible product is available from other vendors, the fact that Bob has not yet purchased it, even though it offers more value to him than it is reasonable to assume that Bob may go on not knowing about it indefinitely. (If not, why hasn't he purchased it yet?) If Alice pays for an ad, Bob buys her product and then derives more value from it than it costs, he is still better off than he was before, even if he could have bought a substitute for a lower price. The value (or utility) Bob derives from the product may not be quantifiable precisely, but it is certainly possible to quantify in approximate terms, and this practice is very common in Economics literature. Price paid in a competitive market is not the only way to quantify utility. Indeed, some of my undergraduate economics courses were concerned very largely with how to estimate the value (or, if you like, the aggregate provided utility) of resources for which no markets exist.
  - pacala 13y ago
    It appears that we are in agreement that Bob is overpaying. The point in contention seems to be whether Bob is "better off" than he was before the purchase. I am unpersuaded by the circular argument "Bob made the purchase, therefore he is better off, otherwise he would have not made it". The whole point of ads is to confuse Bob into making the wrong decisions, and given the size of the ads industry, it's obviously working.

pacala 13y ago

You assume that Alice is the sole provider of the product, which is by and large false. In practice Alice shows an ad to Bob at the $2 price point, while Claire and Darcy have the same product for $0.5. Furthermore, Alice creates an entire marketing literature designed to obfuscate the fact that Claire and Darcy products are the exact same product, at times produced by the exact same manufacturing plant. Bob doesn't have enough time to cut through the bullshit, so never learns about Claire or Darcy, and ends up overpaying $1.50, which is then split $.50 to the marketing department of Alice, $.50 to ADVERT_CO and $.50 to Alice's shareholders. PS. The "value" that B derives from the product is not quantifiable within the orthodox economic framework, as "value" is an arbitrary number that can only be determined by a buyer meeting a seller's price in a competitive market.

gabemart 13y ago
Alice may well be the sole provider of the product. This is especially true in the realm of products with zero marginal costs. Even if we assume she is not, and that a fungible product is available from other vendors, the fact that Bob has not yet purchased it, even though it offers more value to him than it is reasonable to assume that Bob may go on not knowing about it indefinitely. (If not, why hasn't he purchased it yet?) If Alice pays for an ad, Bob buys her product and then derives more value from it than it costs, he is still better off than he was before, even if he could have bought a substitute for a lower price. The value (or utility) Bob derives from the product may not be quantifiable precisely, but it is certainly possible to quantify in approximate terms, and this practice is very common in Economics literature. Price paid in a competitive market is not the only way to quantify utility. Indeed, some of my undergraduate economics courses were concerned very largely with how to estimate the value (or, if you like, the aggregate provided utility) of resources for which no markets exist.
- pacala 13y ago
  It appears that we are in agreement that Bob is overpaying. The point in contention seems to be whether Bob is "better off" than he was before the purchase. I am unpersuaded by the circular argument "Bob made the purchase, therefore he is better off, otherwise he would have not made it". The whole point of ads is to confuse Bob into making the wrong decisions, and given the size of the ads industry, it's obviously working.