By Charles K. Rowley
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On the other hand, it is argued that advertising is a device for distorting the preferences of the unwary consumer and of raising or reinforcing entry barriers into the market in question by intensifying existing product differentiation. The welfare implication~ of these two alternative viewpoints are entirely different. The empirical situation is equally confusing. Following a detailed econometric analysis, it was possible in 1964 for Telser  to conclude that 'there is little empirical support for an inverse association between advertising and competition, despite some plausible theorising to the contrary'.
On this basis, they distinguished the various components of welfare loss resulting from monopoly. Wa was the perceived welfare loss which measured allocative inefficiency, and as usual it is illustrated by the Marshallian triangle ABC. However, the full measure of allocative inefficiency was given by Wax, since X-inefficiency affected the level of marginal cost, and this is measured by the triangle ADE. Wx was defined as the welfare loss from Xinefficiency and refers to the higher costs, Cm)Ce, used to produce the restricted level of output.
B 33 attention upon the case of the cost-reducing invention, as is illustrated by Fig. 5. In Fig. 5, constant costs are assumed both before and after the invention, the unit costs being c before the invention and c'
Antitrust and Economic Efficiency by Charles K. Rowley