Advertising Intensity in the U.S Property and Liability Insurance Industry: Market Power or Profits?

Abstract

This study aims to investigate the conduct of the U.S. Property and Liability insurers on the market in relation to the structure-conduct-performance (SCP) paradigm. Advertising activities constitute the conduct of the industry and the relationship between advertising intensity and market structure is empirically tested over 14-year period. The results indicate a positive and non-significant relation between concentration and advertising and a negative and significant
relation between performance and advertising. Thus, the conduct as measured by advertising intensity does not provide an additional value to the performance of insurers in this highly competitive market. These results are consistent with all three different types of concentration measures in two different profit equations.