Advertising and Market Concentration

Numerous recent writers have assumed that if advertising is a source of monopoly power then this relationship would be affirmatively disclosed by a positive association, as measured by either correlation coefficients or linear regressions, between seller concentration and advertising intensity. Their explorations for such a linear relationship seem to have been somewhat futile, however, because as many have found it as have not.' The purpose of this paper is to examine certain aspects of this matter and to perhaps resolve this curious ambiguity of results. We shall begin with theory and conclude with single and multiple equation tests.