What I mean by that putting a regulation on businesses that says they can't spend more on advertising than expanding their business.

I know something like this would be very hard to regulate, but I'm just asking what would happen hypothetically.


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The first thing we must ask is about which part of advertising are we speaking? Are we talking about advertising on television and other entertainment mediums or are we talking about advertisement via the packaging of the good itself?

One impact either way would be an increase in competition amongst monopolistically competitive firms. These firms are often selling products which accomplish the same ends, however they differentiate their goods in order to give them a competitive edge. The main way which they convey this differentiation to consumers is through advertising. Therefore, if they cannot advertise this differentiation, consumer information may be limited and they may not see a difference between the firm's product and other products in the market. This will lead to parity among products and will move the market closer to a purely competitive market.

Now, sometimes the only differentiation may be the advertising itself (in the form of packaging). For goods such as water bottles (barring whether the water is enhanced somehow) this is the case. There has been much research done to ascertain the best way to package your products in order to draw the consumer to the product. If this was limited, then markets such as these would move towards a purely competitive market.


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