It is generally agreed that the effect of advertising and other promotions is an increase in aggregate consumption but to what extent it effects consumption is a highly debatable issue. Besides advertising, there are other important forces such as technological advances, level of education, increases in population, level of income, changing in lifestyles, etc., that exert a powerful influence on aggregate consumption. It is because of favorable market conditions that demand for personal computers.

Internet, cellular phones, CD players, microwave ovens, quartz watches, personal care products or services and others have expanded at a rapid pace. Advertising, by itself, could not have produced any significant effect in the absence of favorable condition. One can easily see the advertising has not been able to reverse the decline, in the sale of many products such as gramophones, manual type writers, cigars and large sized cars., etc. Advertising can help stimulate demand of new products by communicating relevant communication relevant information and facts. Once the market is growing because of favorable conditions, marketers generally compete for shares of this growth .When the market is mature, or declining, they compete to capture each others market share.

Not every consumer has the same taste or preference for products and services. Marketers attempt to differentiate their offers in terms of price, features, benefits or psychological factors and, as a result of this, consumers have options of different sizes, models, colors, features. Advertising offers consumers a right to choose. In this process, the brands that deliver more satisfaction to consumers become dominating a certain product category. As soon as better products are introduced and effectively advertised by marketers, the preferred products or brands lose their position, making way for newer better products.

Some critics claim that advertising restricts consumer choice because large companies use the power of advertising to limit consumer opinions to a few well known brands. They argue that advertising is used to achieve product or service “differentiation” and, because of this ,products or services are perceived as unique or better than others .In this manner, advertising restricts the choice of alternatives to a few heavily advertised brands. In certain product categories, such as soft drinks, beer etc. only heavily advertised brands dominate the market.

Economists are critical of advertising because it creates a “barriers of entry” of smaller firms which have fewer resources, and cannot match the power of large firms with huge advertising budgets. High costs may inhibit their entry and brands of large probably benefit greatly from this barrier. This result in less competition and consequently higher prices. Smaller firms already operating in the market find it difficult to compete against industry leaders and are often compelled to leave the business. For the instance, with the entry of Pepsi and Coca Cola, domestic soft drink companies had to abandon their businesses. This is how advertising affects competition in the most basic way.