> (companies pay for it, and price it in) ... when you remove the "ad portion" of the price, the consumer markets would get more inefficient, and hence the price would increase
Yes, that is what I meant. I guess "net surcharge" is a better term.
> it's still not clear which of the two would have a greater impact
I believe it is, which is essentially what my argument is about. If the net surcharge is non-trivial and positive, then where are the people (trying to) capture it for profit? They can even piggy-back for free on certain kinds of competitors advertising (your competitors spend on ads explaining why everybody must have a dishwasher, you can just show up a sell a dishwasher).
> However, I don't think it's very hard to come up with mechanisms that serve the same function as ads in terms of market transparency
In theory correct, but in empirical practice this doesn't happen. Where is the car/dishwasher/whatever brand that is cheaper because it doesn't advertise, but consistently come out top in Consumer Reports? Even store brand consumables doesn't consistently test as better or equally good, just as good enough, and cheaper.
This is not one of those things where an obvious inefficiency shows up and everybody is falling over themselves because the market takes a few years or ten to smooth things out -- ads have been a fixture of the market, well, since the 60s, going by Mad Men.
This is the bit where I speculate wildly, but I think some of the fallacy is thinking about product, ad and consumer in an abstract isolation. Effects are probably much more diffused and harder to quantify. Broader status-confirmation than that of being seen carrying a can of Coke rather than Walmart Quality Cola is probably one: it feels good to be buying Tide, even is nobody ever sees the bottle, it's a confirmation to yourself that you've made it, and when you and I can shrug that off and get the cheap alternative, it partly because we can derive status confirmation from our work in a way that frankly isn't available to everybody. Also, positive branding (as supported by ads) is pretty important for employee morale which rubs off on product quality. This is way out in the margins, but an employee at the white-label detergent factory probably isn't going to feel the same pride the Tide employee is, and even a little compounds over time.
Yes, that is what I meant. I guess "net surcharge" is a better term.
> it's still not clear which of the two would have a greater impact
I believe it is, which is essentially what my argument is about. If the net surcharge is non-trivial and positive, then where are the people (trying to) capture it for profit? They can even piggy-back for free on certain kinds of competitors advertising (your competitors spend on ads explaining why everybody must have a dishwasher, you can just show up a sell a dishwasher).
> However, I don't think it's very hard to come up with mechanisms that serve the same function as ads in terms of market transparency
In theory correct, but in empirical practice this doesn't happen. Where is the car/dishwasher/whatever brand that is cheaper because it doesn't advertise, but consistently come out top in Consumer Reports? Even store brand consumables doesn't consistently test as better or equally good, just as good enough, and cheaper.
This is not one of those things where an obvious inefficiency shows up and everybody is falling over themselves because the market takes a few years or ten to smooth things out -- ads have been a fixture of the market, well, since the 60s, going by Mad Men.
This is the bit where I speculate wildly, but I think some of the fallacy is thinking about product, ad and consumer in an abstract isolation. Effects are probably much more diffused and harder to quantify. Broader status-confirmation than that of being seen carrying a can of Coke rather than Walmart Quality Cola is probably one: it feels good to be buying Tide, even is nobody ever sees the bottle, it's a confirmation to yourself that you've made it, and when you and I can shrug that off and get the cheap alternative, it partly because we can derive status confirmation from our work in a way that frankly isn't available to everybody. Also, positive branding (as supported by ads) is pretty important for employee morale which rubs off on product quality. This is way out in the margins, but an employee at the white-label detergent factory probably isn't going to feel the same pride the Tide employee is, and even a little compounds over time.