Abstract
This paper examines the negative externality imposed by a direct marketing firm on the consumers who must spend time reading and processing the advertising they receive from that firm. A model is developed to show that with low communication costs, a firm would send out more unsolicited advertising messages than would be desired by consumers and a social welfaremaximizing planner. The optimal Pigovian tax to eliminate the problem of excessive message sending is then derived. The extent of the problem in a number of media, including direct mail, telemarketing, and the Internet, is briefly examined.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Bloom, P. N., Milne, G. R., and Adler, R. (1994) ‘Avoiding Misuse of New Information Technologies: Legal and Societal Considerations’, Journal of Marketing, 58(1), 98–110.
‘Canada’, Direct Marketing, (Sept. 1994), 47–48.
Direct Marketing, Editorial (Oct. 1994), 82.
Direct Marketing Association (DMA) (1992) Statistical Fact Book, 1992–93. NY: DMA.
Foxman, E. R. and Kilcoyne, P. (1993) ‘Information Technology, Marketing Practice, and Consumer Privacy: Ethical Issues’, Journal of Public Policy & Marketing, 12(1), 106–119.
Gattuso, G. (1994) ‘Map Issued for Internet Advertising’, Direct Marketing, (Sept.), p. 5.
Goodwin, C. (1991) ‘Privacy: Recognition of a Consumer Right’, Journal of Public Policy & Marketing, 10(1), 149–166.
Hill, G. C. (1994) ‘Electronic ‘Agents’ Bring Virtual Shopping a Bit Closer to Reality’, Wall Street Journal, (Sept. 27), A1.
Jones, M. G. (1991) ‘Privacy: A Significant Marketing Issue for the 1990s’, Journal of Public Policy & Marketing, 10(1), 133–148.
Leff, N. (1984) ‘Externalities, Information Costs, and Social Benefit-Cost Analysis for Economic Development: An Example from Telecommunications’, Economic Development and Cultural Change, 32(2), 255–276.
MacKie-Mason, J. K. and Varian, H. (1994) ‘Economic FAQs About the Internet’, The Journal of Economic Perspectives, 8(3), 75–96.
Milne, G. R. and Gordon, M. E. (1993) ‘Direct Mail Privacy-Efficiency Trade-Offs within an Implied Social Contract Framework’, Journal of Public Policy & Marketing, 12(2), 206–215.
Nask, E. L. (1986) Direct Marketing, 2nd ed. NY: McGraw-Hill Book Co.
Norwood, G. C. (1993) ‘Hostility Growing: Consumers Strike Back at Marketers’, Managers Magazine, (Nov.), 31–32.
Resnick, R. and Taylor, D. (1994) The Internet Business Guide: Riding the Information Superhighway to Profit, Sams Publishing, Indianapolis, IN.
Simon, H. (1978) ‘Rationality as Process and as Product of Thought’, American Economic Review, 68(2), 1–16.
Stone, B. (1994) Successful Direct Marketing Methods, 5th ed. Lincolnwood. IL: NTC Business Books.
Winston, A. (1993) Direct Marketing and the Law: What Managers Need to Know. John Wiley & Sons, Inc., New York.
Author information
Authors and Affiliations
Additional information
The author wishes to thank Said Atri, Glenn Graham, Thomas Zlatoper, and 2 anonymous referees for their help.
Rights and permissions
About this article
Cite this article
Shiman, D.R. When e-mail becomes junk mail: The welfare implications of the advancement of communications technology. Rev Ind Organ 11, 35–48 (1996). https://doi.org/10.1007/BF00163596
Issue Date:
DOI: https://doi.org/10.1007/BF00163596