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Budweiser (now owned by a Belgium based beer company), Miller and Coors who together produce 85% of all beer consumed in the US, each spend well over $250 million a year on television advertising campaigns, promoting their beer brands. Obviously, if one firm is advertising its brands heavily, the others must also advertise to defend their market shares.

Do you think these firms would welcome congressional legislation which restricted the amount that any one firm could spend on advertising to $1 million yearly, and thereby allowed them all to drastically reduce their costs without fear of losing ground to each other? Are wireless telephone companies in the US market pursuing this scenario compatible with the practice of non-price competition? Explain your answer in both cases.

My answer would probably be yes in both scenarios because it would cost less to advertise because of the limitations. However I would think that if you had a limit there is no way to really out do the competitor.

Help please. Thanks

  • Economics -

    If advertising costs were limited, the major companies would probably lose some market share to smaller companies that didn't advertise as much.

  • Economics -

    Did you ever find the answer to this. I am working on it for my final now.

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