Comparison of generic advertising for a competitive industry to a monopolist

This paper compares competitive output and generic (or check-off) advertising of the type commonly facilitated in agriculture to the levels of output and advertising under monopoly with the same industry cost structure and consumer preferences using the complementary preference approach developed by Becker and Murphy and others. Advertising is assumed to be seller-determined in the case of monopoly or by an industry advertising planner in the case of competition. The marginal benefit function of advertising in the case of competition is much different than for a monopolist with the same industry cost structure. Although of similar mathematical form in equilibrium, the resulting behavior and intuition are different, and neither achieves a social optimum. Conditions under which monopoly output and advertising are greater than under competition with generic advertising are derived.