I Can See Clearly Now: Lee Benham, Eyeglasses, and the Empirical Analysis of Advertising and the Effects of Professional Regulation

Competition Policy International, Vol. 9, No. 1, pp. 156-162, Spring 2013

George Mason Law & Economics Research Paper No. 16-16

8 Pages Posted: 26 Apr 2016

See all articles by Bruce H. Kobayashi

Bruce H. Kobayashi

George Mason University - School of Law

Timothy J. Muris

George Mason University, Antonin Scalia Law School

Date Written: April 1, 2016

Abstract

Lee Benham’s 1972 article, The Effect of Advertising on the Price of Eyeglasses, represents an early, highly influential example of the now common empirical methodology in law and economics where the variation between state laws permits natural “experiments” to study the effects of different approaches to regulation. Benham found that mean prices of eyeglasses in states that prohibit advertising by optometrists were $6.70 (25 percent) higher than in states that did not prohibit such advertising. Cross-section regression analyses also found significant increases in the price of eyeglasses in states with complete restrictions on advertising, with average prices in such states $7.48 higher. Benham’s main result was robust to the inclusion of a variable to control for entry restrictions. He also found that mean prices for eyeglasses in states that banned only price advertising were higher than in states with no restrictions, but lower than in states with complete advertising restrictions. These striking results challenged the existing conventional economic wisdom that the costs of advertising raised market prices. Benham provided tangible and concrete evidence of both the costs of economic regulation to consumers and the likely beneficiaries of such regulation.

Keywords: Antitrust law, anticompetitive, Bates, Benham, competition, cross-section regression analysis, economic, federal, regulation, Economic experiment, empirical methodology

JEL Classification: K21, K23

Suggested Citation

Kobayashi, Bruce H. and Muris, Timothy J., I Can See Clearly Now: Lee Benham, Eyeglasses, and the Empirical Analysis of Advertising and the Effects of Professional Regulation (April 1, 2016). Competition Policy International, Vol. 9, No. 1, pp. 156-162, Spring 2013; George Mason Law & Economics Research Paper No. 16-16. Available at SSRN: https://ssrn.com/abstract=2769916

Bruce H. Kobayashi

George Mason University - School of Law ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8034 (Phone)
703-993-8088 (Fax)

HOME PAGE: http://mason.gmu.edu/~bkobayas

Timothy J. Muris (Contact Author)

George Mason University, Antonin Scalia Law School ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-9421 (Phone)
703-993-8088 (Fax)

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