2. In a famous article on advertising, Gary Becker and Kevin Murphy wrote about

Question

2. In a famous article on advertising, Gary Becker and Kevin Murphy wrote about advertisements that run during television programs: "One can say either that advertising pays for the programming the usual interpretation-or that programming compensates for the advertising, which is our preferred interpretation."Viewing ads during a television program (or hearing them during a radio broadcast) makes consumers worse off, so they must be compensated (with programming) for having experienced the ads. On the other hand, print ads in newspapers and magazines can be avoided by consumers, so these ads must make consumers better off; otherwise, no one would ever read them. Use this theory to answer the following questions a. Think about the different types of advertisements discussed in the chapter (informative, signaling, part of the product) Which type is more likely to appear on TV? Which type is more likely to appear in a newspaper or magazine? Often you'll see television commercials, especially for pharmaceuticals, that say: "See our ad in such-and-such magazine."What does this say about the difference between television and print ads?

Explanation / Answer

Answer:-

If we look closely, we will find that the advertisements used on TV are less informative than the advertisement used in newspapers and magazines. A lot of information is utilized in the print advertisement. If Becker and Murphy are considered to be correct then the uninformative ads must make the consumers worse off. But in the text, it is indicated that these types of ads are actually helpful in improving the value of a good which is being advertised despite making the consumer worse off. Most of the advertising media try to utilize the “see our ad” technique.

If we look at the example of a pharmaceutical company, then in the advertisement, this company will love to pour a lot of complicated information about the medicine and products but in case of TV ads, this will not be possible so the main objective of this company will be to improve the value of the product —not necessarily creating value from the ad itself.

Answer:-

If due to DVR technology, TV ads become avoidable, then it is important for TV ads to be better off for the consumer rather than prove to be worse off. This can be accomplished if the TV ads also include a lot of information similar to newspaper or print ads. But the potential of TV is quite huge in comparison to print ads. They can become as ­entertaining (sometimes more entertaining) than the TV programs during which they air. If advertisers start ­making commercials that are really funny, for example, people will want to watch them despite their ability to fast forward, just to be ­entertained. New technologies such as DVRs, therefore, should cause firms to invest more in making ads entertaining. Most important, with DVRs, ads will become incorporated into the ­television show itself so they cannot be skipped

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