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A note on: advertising and the price and quality of optometric services

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Theoretical research has long debated whether advertising increases market efficiencies (fostering high quality, low-priced products) or leads to perverse equilibria (fostering low-quality, higher-priced rip-offs). This note re-evaluates data collected by the US Federal Trade Commission in 1977 and reported in Kwoka (1984) who finds that marketing deregulation reduces prices of eye examinations without a decline in market quality. The re-analysis of the data reveals possible market failure in the optometric industry: an erosion of eye examination quality without a decline in prices. This conclusion is supported by recent trends within this industry and empirical findings in related professions

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/Inseadwp1991/91-28.pdf

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Copyright INSEAD. All rights reserved