IN spite of the interest in advertising, research in the field has not been very impressive. The reason for this is simply that problems presented in marketing and advertising are often unique, and their satisfactory solutions require the development and synthesis of their own body of theory. This body is lacking.1 In Australia, in particular, advertising has not attracted a large amount of research. This is mainly because of the slowness with which marketing has been accepted as a separate subject of study in our universities, the lack of official statistical information on advertising, and the reluctance of Australian companies to disclose information on their marketing promotion efforts and expenses. The aim of this study is to analyse the marketing competitive behaviour of eight consumer goods producers, which economists and marketing analysts claim to be advertising heavily in Australia (Metwally, 1973a). In particular we estimate the magnitude of advertising expenditure consistent with the object of profit maximisation, and compare it with the actual expenditure of some dominant firms producing those commodities. In section I, we develop a mathematical model of demand similar to that of Dorfman and Steiner (1961). Section II considers the form of functional relationship that exists between sales, price and advertising. In section III different econometric models of competitive interdependence are compared and evaluated. Finally in section IV, the findings and their main implications on promotional competition are discussed. I

D. M. Schydlowsky, M. Syrquin, The Estimation of CES Production Functions and Neutral Efficiency Levels Using Effective Rates of Protection as Price Deflators, The Review of Economics and Statistics, Vol. 54, No. 1 (Feb., 1972), pp. 79-83

which is free from the influence of prices. Bank debits, which afford the most general index of business activity, measure the dollar volume of transactions made through checks, and hence reflect the prices of goods, services (i.e., wages in general), and securities, as well as the volume of transactions; whereas most series expressed in physical units, however well they may reflect general movements, actually apply to some particular phase of activity, such as freight shipments or manufacturing.

and the less-developed countries. Tower's alternate explanation that A does not differ systematically while (er/f) does is not very appealing. The empirical evidence (p. 453) suggests that r is an external cost and does not vary significantly from nation to nation. Given this, the less-developed countries would have to weight e relatively twice as large as the advanced nations to explain the typical disparity in the estimates of A between the two groups.

carried out we shall need a very substantial cut in individual income taxes. What that amount should be must be reached by a process of experimentation. I would lean on the side of bold reductions. We must learn to be prepared to reverse any action in such measure as events prove to be necessary. The President's Economic Report wisely counsels the need to be flexible. Unless the government is prepared to reverse itself, we shall never dare to act promptly and effectively. This is a lesson every member of the Congress needs very much to learn. Our experience since I948 gives proof of the fact that we can stoke an immense amount of fuel into the American economy without producing inflation. Since I948 (despite the Korean explosion) wholesale prices have risen less than i per cent per annum. In the peaceful days before the First World War, wholesale prices rose 3 per cent per annum for a period of I5 years. There is a real danger that we shall be too cautious always fearful of inflation and that in consequence we shall fail to reach even approximately our full production potential. There is also a danger that we shall be dragged down by the dogma of the balanced budget. It is generally agreed that the current ratio of money and liquid assets to GNP is favorable. As our GNP rises, our debt may also be permitted to rise, if that proves to be necessary to promote adequate growth and expansion. It is not improbable that the structural adjustment which is needed to offset the structural deflationary changes currently in process will require a cut in taxes substantially in excess of the cut in federal expenditures.

controls, has found many advocates. The idea of employing OPA methods of price control without rationing would be patently stupid. The establishment of maximum prices which are below free market prices and not coupled with official rationing would create a strong excess demand and would force distribution of the goods to be accomplished through private rationing techniques of retailers favoritism or through first-come-first-served techniques standing in lines or through secret price premiums black markets. Hence, rationing by the government would have to be introduced in order to permit an orderly distribution of the commodities, which would all be scarce at prices fixed below the free market level. In peacetime, without the strong feeling of urgency in the striving for a universally accepted goal, such a system would provide increased incentives to consume the goods, reduced incentives to produce them, increased incentives to break the law, increased incentives to enforce red tape, increased incentives to use arbitrary power and restrict individual freedoms. It would be a disequilibrium system, making shortages and excess demand a chronic condition, without hope for correction and with increasing difficulties of enforcement. It is not intended here to oppose rationing of anything under any circumstances. One may make a plausible argument for resorting even in peacetime to direct controls for a few selected things under very specific circumstances; to wit, (i) if the object of control is a necessity (such as bread, not meat), (2) if the elasticity of its supply in the short run is practically zero, (3 ) if the elasticity of demand for it is very low, and (4) if it can be reasonably and safely expected that the will be over soon, for example, because demand at the controlled price will greatly decrease or supply greatly increase in the very near future. One may conceivably even argue, although less plausibly, for a general price reduction scheme with general rationing if there is evidence that the reduced prices will within a very brief time be the equilibrium prices owing to an imminent decline in demand or increase in supply. No sound argument, however, has thus far been presented to justify direct controls to enforce a general roll back of prices if neither a decline in demand nor an increase in supply is in sight. From this point of view, the United States is not in an emergency expected to pass quickly. We cannot expect a drastic reduction in demand in the near future nor do we wish for it -and production is now at a rate as high as we can possibly maintain.

much less than it was in the estimates Barger used. Thus, the level of our pay roll series in all years, as well as the movement since I939, is independent of Census data except for a small part of the total. Social security data, the principal source of information on compensation of employees, is not used in arriving at the final product aggregates. In fact, the statistical interdependence between the annual Commerce income and product estimates, aside from certain wash items, like domestic service pay rolls which appear on both sides of the account, is largely restricted to the movement of some major portions of the two aggregates prior to I939 and to some overlapping of sources as between the estimates of personal consumption expenditures and those of income of unincorporated enterprises. This is not, of course, to deny the probability that many firms report the same figures to various collecting agencies, even though they may be erroneous. Neither does it deny that the investigator, when in doubt as to the best estimating procedure or faced with conflicting evidence, properly examines any related data referring to the opposite side of the account for supplementary guidance.

Discussion regarding Professor L. W. Mints' recent monetary policy proposals I has been concentrated on his basic suggestion that contra-cyclical fiscal flexibility be attained primarily from the receipts side, with a substantially fixed budget of total expenditures. The present writer will limit himself to outlining an ancillary proposal that a general sales tax should figure prominently in any plan for contra-cyclical variations in tax receipts, and to a reconsideration of the case for sales taxation in the light of such a receipts policy. Professor Mints' plan includes a special device which suggests with particular force the desirability of a linkage with sales taxation. This is his proposed sales subsidy as a remedial measure for deep depressions. The sales subsidy is proposed despite the admitted administrative difficulty of superposing this negative tax on a Treasury without provision for collecting the corresponding positive levy. This particular feature of Mints' plan may be only an insignificant afterthought, since its author expects slumps to be controlled by less extreme monetary and fiscal measures.2 Yet even though Mints' own sales subsidy be disregarded as a superfluous gadget, definite reasons remain for preferring sales to income taxation as a vehicle for moderate contra-cyclical variation in receipts, just as Mints himself prefers the sales to the income subsidy as a vehicle for deflation control in extremis. In the discussion which follows, the normal (full employment, balanced budget, but nonboom) sales tax rate is envisaged as substantial, perhaps the io or 15 per cent suggested during World War II. Rate variations about the usual American state figures of two and three per cent can hardly be expected to have practical effects.