Mary Alice Shaver
Jönköping International Business School

MARY ALICE SHAVER has a M.S. degree from the University of Illinois and a Ph.D. from Indiana University in Bloomington. Her publications have centered on the effects of advertising in society, on comparative economics in the global environment, on the effects of competition in the media industry and on consumer behavior with regard to influences of economic regulation and standards.

Mary Alice Shaver’s previous positions have been as a full professor at the University of North Carolina at Chapel Hill, at Michigan State University and at the University of Central Florida. While at the University of North Carolina, she was director of the Ph.D. program for several years as well as director of the M.A. program. Most of her Ph.D. advisees have gone on to positions in the academic world; a few are working in industry.

She was President of the Association of Education in Journalism and Mass Communication and also of the American Academy of Advertising and remains active in each of these organizations as well as the global Media Economics conference organization. She is on the editorial board of several journals.

Mary Alice Shaver is a full professor in the Media Management Transformation Centre at Jönköping International Business School and holds the Hamrin Chair in Media Economics with a specialty area of advertising economics and competition.  

Mary Alice Shaver joined Jönköping International Business School in August 2008 as the Hamrin Professor of Media Economics.

MEDIA ECONOMICS

The Economics of the Advertising Industry

Advertising expenditures for 2007 have been estimated at 630 billion USD worldwide. In the years since 1990, the figure (with the exception of 2001) has shown a remarkably strong growth trend, much of the change coming from Asia and Europe.

Until the mid-20th century, most economists discounted the role of advertising in the economy. One criticism of advertising has been that there are both inherent inefficiencies and perceived economic wastes in advertising activity. In his seminal work on monopolistic competition, Chamberlin (1933) pointed out that differing assumptions must be made for differing situations and that the advertiser may both add to and subtract from the markets of his immediate competition. Chamberlin correctly stated that the market consists of all similar products and also of all products that could be considered as possible substitutions. Others have argued that advertising does not contribute to the overall economy, but merely moves the money among brands. More recently, advertising has been viewed as generating positive competitive activity.

The advertising industry operates in what should be termed a monopolistic competition. It fits best under this umbrella due to the fact that optimal price comes when product quantity yields a margin cost and when firms involved sell products that may be differentiated in several ways.

The industry and its economic impact have changed dramatically with the introduction of the Internet and new media. While both economies of scale and economies of scope have always been present in the industry, their impact has increased in the new environment. The emergence of the Internet provided advertisers with yet another way to reach specific niche markets, but it also brought new challenges in cutting barriers to entry and availability to non-traditional advertising entities. The challenge of measuring the number of impressions, the cross-audience reach and the audience impact has been magnified. With the advent of new technology, more media and message synergy has become possible. The advances have challenged the traditional role of advertising in media markets and researchers are equally challenged to develop new measures of audience impact and cost efficiencies.