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Playing the Game

A Look at two USSC papers that address relationship of game theory and sign regulation

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The regulation of signage is as much an inevitability and certainty as death and taxes. However, it’s important to consider the motivation behind their regulation. Are code administrators taking the long view and considering how the ordinances they administer will bolster local economic growth, or are they looking at escalating fees and draconian supervision as a cash grab for pet projects or slush funds? And, are they interested in business owners being informed about how a well-executed sign program will benefit their businesses?
David McAdams, a professor of economics at Duke Univ., considered these points in a paper he’s authored for the United States Sign Council (USSC) entitled The Economics of On-Premise Signs. Its introduction sets a strong, definitive tone: The opening sentence of Section 1.1, “Lack of Consistent On-Premise Sign Regulations”, states “On-premise signs are ‘essential to small-business survival’”, but, in many municipalities, local businesses face a variety of regulatory constraints on what sorts of signs they are allowed to display. Worse still, there is little consistency and uniformity in municipal-sign regulations – they can vary widely from town to town and state to state.”
Immediately thereafter, McAdams juxtaposes the sign codes of Henrietta and Brighton, NY, similar cities with approximately 40,000 residents outside Rochester. However, the towns diverge with their codes; Henrietta reportedly allows freestanding signs up to 100 sq. ft., with an additional 50 sq. ft. permitted if landscaping is planted underneath the sign, whereas Brighton allows less than half, according to the report. Moreover, McAdams states that code-compliant signs may be approved in 2-3 days in Henrietta, whereas Brighton stipulates that three separate committees review sign proposals, and the process requires 40-45 days.
What is the motivation behind Brighton’s strict code? The paper references “game theory”, a term used in economists’ circles to analyze strategic interactions. According to McAdams, Brighton adheres to a “misguided competition metaphor” that, for one business to succeed, another must fail as a result. That falls under the “zero sum game” theory – for every winner, there must be an equivalent loser. USSC consultant Richard Crawford wrote a companion report, Introduction to Game Theory and On-Premise Sign Regulation, that explains in greater detail the underlying theories extolled in McAdams’ paper.
The notion that a business that purchases a larger sign in an effort to grow its customer base will invariably diminish other businesses is misguided. Certainly, some businesses will exist in direct competition with one another, but most are noncompeting, or even complementary. If a city writes regulations with the ultimate goal of economic growth, the proverbial rising tide will lift all boats.
Clearly, business closures aren’t in any municipality’s best interest. A well-considered sign code should provide all businesses the room and opportunity to succeed. If an ordinance begins from a place of allowing business owners some latitude in the signs they obtain, they will be encouraged to set out their shingle in that city. Narrow restrictions, by contrast, provide a chilling effect. Even those with the time and resources to pursue a variance or ordinance amendment will likely prefer not to wage the battle, and simply put down stakes in a more amenable place.
I’ll delve into the papers and their underlying theories in more detail in December’s Editorially Speaking column. The industry has published many studies that elucidate signs’ many economic effects, but a deeper look at what motivates code administrators should help inform sign-code conversations.
 

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