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Narrative
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Bluetooth The Pirate: According to the principles of game theory, like the prisoners dilemma, the ban on TV advertising was actually a boon for tobacco company profits.
The argument is like this: Imagine two tobacco companies split the market evenly, without ads. If one company adverises, and its competitior does not, then it will profit more, even with the cost of ads, due to the extra market share, and the competitor will suffer a massive loss of sales volume. If the competitor does advertise, then they will split the market evenly again, but lose some profit because of the cost of ads, but neither will go bankrupt. Clearly, no matter what either company does, it is in the best interest of each company to advertise, even though the maximum total profit comes from neither one advertising.
So, when the ban comes along, it's great for all of them. They get maximum profits, assured by law that their competitor can't advertise and steal their customer base. Of course, this simple example ignores the fact that TV isn't the only ad channel. It is the most expensive, and can impact a company's profits greatly.
Ununnilium: It also ignores the fact that TV ads don't just split market share, they pull in extra.
Silvercatmon : I've heard this argument applied to hard liquor, not cigarettes, and hard liquor had a self imposed ban on radio and TV ads for 50 years, now they don't.
If I remember correctly from one of my business class several years ago, in the short run the ban does help with profits, because the money they would be spending on the expensive TV ads is profit.
In the long run, hard liquor companies are not just competing with each other, they are competing with beer, wine, and other alcoholic beverages, along with non-alcoholic alternatives. If they don't keep reminding the people who are not hard liquor fanatic how they want to drink it, they will buy something else.
Place Holder: I tried to add this entry, but looking back on it, seemed a bit wordy and long compared to most other entries. Suggestions?
"*Thank You For Smoking (In the book form) Had Nick Naylor sit in on a meeting crafting one of these messages. They decided on "Everything your parents told you about smoking is right". They didn't just choose this because it made Teenage kids want to rebel against their parents even more, but also because the last three words (Smoking Is Right) was the message they wanted to send"
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