Kaldor(1950): advertising is"manipulative"and reduces competition and therefore reduces welfare Advertising would persuade consumers to believe wrongly that identical products are differentiated because the decision of which brand to purchase depends on consumers' perception of what the brand is rather than on the actual physical characteristics of the product. Therefore, prices of heavily advertised products would rise far beyond their cost of production Advertising serves as an entrydeterring mechanism since any newly entering firm must extensively advertise in order to surpass the reputation of the existing firms. Thus, existing firms use advertising as an entry-deterrence strategy and can maintain their dominance while keeping above-normal profit levels• Kaldor (1950): advertising is "manipulative" and reduces competition and therefore reduces welfare. • Advertising would persuade consumers to believe wrongly that identical products are differentiated because the decision of which brand to purchase depends on consumers' perception of what the brand is rather than on the actual physical characteristics of the product. Therefore, prices of heavily advertised products would rise far beyond their cost of production. • Advertising serves as an entrydeterring mechanism since any newly entering firm must extensively advertise in order to surpass the reputation of the existing firms. Thus, existing firms use advertising as an entry-deterrence strategy and can maintain their dominance while keeping above-normal profit levels