The opponents and proponents of competitive brokerage commission rates for the New York Stock Exchange have, for nearly a decade, been dueling in the hearing rooms of Congress and the Securities and Exchange Commission (SEC). The contest developed because financial institutions, in attempting to skirt the New York Stock Exchange (NYSE) and its fixed commission rates, had used a variety of trading practices that were sharply criticized by the government overseers of the securities markets. The securities industry, the government overseers, and scholars have debated what would be the most effective regulatory approach to improving the social performance of the securities marketplace. Would it be through initiating even more stringent federal regulation of exchange behavior? Or, would it be through selective deregulation to increase competition, particularly in the determination of commissions? Competitive forces might constrain and direct that behavior. The policy that has been developing would deregulate and restructure the marketplace to create a “central market system.” Competition would replace regulation to whatever extent may be possible, in determining both commission rates and the quality of marketplace services provided [6]. But, the contest has been long and often heated. From the thrusts and parries, there can be identified some fundamental issues concerning the economics of the stock exchange as a form of marketplace organization.

IN this paper I have esitimated the amount United States cigarette consumption has been affected by cigarette advertising and by the health scare over smoking. During 19531970 the health scare depressed cigarette consumption considerably more than cigarette advertising boosted it. Section I presents econometric estimations of the demand function for cigarettes, incorporating econometric corrections for multicollinearity. Section II gauges the comparative effects of advertising and the health scare. On these results, section III evaluates whether the recent Congressional ban of broadcast advertising of cigarettes will promote public health by reducing cigarette consumption. Although the advertising elasticity of demand was positive, it was quite small. More importantly, however, the ban also eliminated the health-scare-oriented antismoking commercials, which the Federal Communications Commission had forced broadcasters to air in proportion to cigarette commercials. Since the health scare has been the relatively stronger influence, the net effect of the ban may be to increase consumption, not decrease it. Ban advocates disregarded the interconnection of cigarette and antismoking commercials; the United States cigarette manufacturers apparently were not confused about the interconnection. Finally, the probable anti-competitive effects of the ban are noted in section IV.

ABSTRACT An econometric time‐series model of off‐board trading of NYSE‐listed stocks shows that high NYSE commission rates were an incentive for third‐market trading but that trading on the regional exchanges, which is most of the off‐board trading, has been affected very little by commissions or their deregulation. The effects of some changes in the trading organization and rules are estimated, including several that are part of the emerging National Market System. The estimates imply that the NMS has increased competition for the NYSE, as Congress intended, and has prompted the NYSE to improve its performance to retain market share.