The economic analysis of advertising
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...The notion that advertising provides information about the firm goes back at least to Nelson (1974) (see also Bagwell 2007 for a review of the literature). More recently, relating advertising to CSR, McWilliams and Siegel (2000, 2001) suggested that CSR-related advertising and media coverage may increase consumer awareness of CSR. This, in turn, increases the demand for socially responsible behavior and the returns to engaging in such behavior. They did not, however, formally model or test this conjecture. All these arguments lead to our main prediction that the impact of CSR activities on the value of the firm will be positively related to advertising intensity. We note that this prediction does not imply that firms need to advertise their CSR activities (as suggested by McWilliams and Siegel 2000, 2001); all that is required is that advertising intensity leads to increased awareness of the firm, including its CSR activities. Our prediction differs from the predictions derived from Schuler and Cording’s (2006) model. Schuler and Cording (2006) also argued that information intensity is one of the key elements in the CSR–value relation. Their argument relies on the dissemination of CSR information by the firm or other parties. This could happen through advertising, but it is likely that most advertising does not directly speak to the firm’s CSR activities. Moreover, Schuler and Cording’s (2006) argument would only apply to firms with particular...
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...The notion that advertising provides information about the firm goes back to at least to Nelson (1974) (see also Bagwell (2007) for a review of the literature)....
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...The notion that advertising provides information about the firm goes back at least to Nelson (1974) (see also Bagwell 2007 for a review of the literature). More recently, relating advertising to CSR, McWilliams and Siegel (2000, 2001) suggested that CSR-related advertising and media coverage may increase consumer awareness of CSR. This, in turn, increases the demand for socially responsible behavior and the returns to engaging in such behavior. They did not, however, formally model or test this conjecture. All these arguments lead to our main prediction that the impact of CSR activities on the value of the firm will be positively related to advertising intensity. We note that this prediction does not imply that firms need to advertise their CSR activities (as suggested by McWilliams and Siegel 2000, 2001); all that is required is that advertising intensity leads to increased awareness of the firm, including its CSR activities. Our prediction differs from the predictions derived from Schuler and Cording’s (2006) model....
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...The notion that advertising provides information about the firm goes back at least to Nelson (1974) (see also Bagwell 2007 for a review of the literature). More recently, relating advertising to CSR, McWilliams and Siegel (2000, 2001) suggested that CSR-related advertising and media coverage may increase consumer awareness of CSR. This, in turn, increases the demand for socially responsible behavior and the returns to engaging in such behavior. They did not, however, formally model or test this conjecture. All these arguments lead to our main prediction that the impact of CSR activities on the value of the firm will be positively related to advertising intensity. We note that this prediction does not imply that firms need to advertise their CSR activities (as suggested by McWilliams and Siegel 2000, 2001); all that is required is that advertising intensity leads to increased awareness of the firm, including its CSR activities. Our prediction differs from the predictions derived from Schuler and Cording’s (2006) model. Schuler and Cording (2006) also argued that information intensity is one of the key elements in the CSR–value relation....
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Additional excerpts
...123See McFadden (1974)....
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"The economic analysis of advertisin..." refers background in this paper
...17 Drawing on Lancaster’s (1966) characteristic approach to consumer behavior, Nichols interprets Z as the level at which a characteristic is enjoyed, when the market good is consumed at level X and advertised at level A....
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...42 This is also consistent with Nelson’s (1975) finding that the relationship between advertising and profitability is negative for search goods, though the relationship is not significant....
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...To develop this argument, Nelson (1970) makes a distinction between search and experience goods....
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...42 This is also consistent with Nelson’s (1975) finding that the relationship between advertising and profitability is negative for search goods, though the relationship is not significant. 43 Following Telser (1969a) and Demstez (1979), it may be shown that the accounting profit rate overstates the true profit rate if the accounting profit rate exceeds the growth rate of advertising capital....
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...In response to the anti-competitive interpretation of advertising under the persuasive view, Nelson (1974b) makes the pro-competitive argument that advertising, when properly understood, is informative....
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...I turn next to a pair of insightful papers by Nelson (1970, 1974b).11 He begins with a simple question: How, exactly, does advertising provide information to consumers?...
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