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Question

Professional organizations (for example, the American Medical Association and the American Bar Association) have been active advocates for regulation to restrict the right of professionals to advertise. Describe what economic incentives might exist for existing professionals to restrict advertising.

Answer 1

The existing professional have a strong economic incentive to restrict advertising. First, the tradition of building up image and goodwill has been based on world of mouuth and reputation built up through successes in medical treatment to different patients/ successes in winning major court cases provided by individual physicians/ won by advocates and lawyers over a long period of time. There is also a system of juniors being trained by the senior professional in practice of medicine and law. The advantage enjoyed by the senior professional with long experience - whether successful or not, will be lost if the younger professional start advertising their individual academic and professional achievements and build up their reputation. The successful senior professionals may face severe competition from some of the more brilliant younger ones with quick successes early in life, especially because of their knowledge of latest technologies. This is going to be a problem in retaining juniors and the juniors may under cut in fees. Also, the seniors who have not been very successful will find the competition from younger but more knowledgable junio professionals.
Second, while advertising may lead to more competitive markets and break the oligopoly of the big few (as in the case of Law firms and Audit firms, there is another economic incentive for senior professionals to restrict advertising. Greater freedom in advertising may lead to misuse and clients may get confused and even loose trust on these professions in terms of the level of integrity within the profession. That would hurt the senior professional the most in the beginning because they are treated as leaders of profession.