A Post Keynesian approach to advertising and its relevance for the transition economies

Abstract

The paper attempts to identify a coherent Post Keynesian approach to advertising. Although the neoclassical explanation of advertising cost is encapsulated by the Dorfman—Steiner theorem, and static in character, the Post Keynesian theory provides a realistic and dynamic framework within which advertising can be viewed as strategic investment of firms, financed by their retained profits. The empirical part of the paper analyzes the impact of the flow of profits on advertising outlays for firms in a transition economy and the results confirm the relevance of the Post Keynesian approach.

Keywords:

• advertising expenditures
• dependence effect
• Dorfman-Steiner theorem
• structure-conduct-performance paradigm
• transition economics