The economic analysis of advertising
TLDR
A comprehensive survey of the economic analysis of advertising can be found in this article, with a focus on positive and normative theories of monopoly advertising, price and non-price advertising, theories of advertising and product quality, and theories that explore the potential role for advertising in deterring entry.Abstract:
This chapter offers a comprehensive survey of the economic analysis of advertising. A first objective is to organize the literature in a manner that clarifies what is known. A second objective is to clarify how this knowledge has been obtained. The chapter begins with a discussion of the key initial writings that are associated with the persuasive, informative and complementary views of advertising. Next, work that characterizes empirical regularities between advertising and other variables is considered. Much of this work is conducted at the inter-industry level but important industry studies are also discussed. The chapter then offers several sections that summarize formal economic theories of advertising. In particular, respective sections are devoted to positive and normative theories of monopoly advertising, theories of price and non-price advertising, theories of advertising and product quality, and theories that explore the potential role for advertising in deterring entry. At this point, the chapter considers the empirical support for the formal economic theories of advertising. A summary is provided of empirical work that evaluates the predictions of recent theories of advertising, including work that specifies and estimates explicitly structural models of firm and consumer conduct. This work is characterized by the use of industry (or brand) and even household-level data. The chapter then considers work on endogenous and exogenous sunk cost industries. At a methodological level, this work is integrative in nature: it develops new theory that delivers a few robust predictions, and it then explores the empirical relevance of these predictions at both inter-industry and industry levels. Finally, the chapter considers new directions and other topics. Here, recent work on advertising and media markets is discussed, and research on behavioral economics and neuroeconomics is also featured. A final section offers some concluding thoughts.read more
Citations
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Advertising to Status-Conscious Consumers JOB MARKET PAPER
TL;DR: In this article, the authors developed a simple, social theory of advertising in a setting where consumers value social status, and showed that in equilibrium, the firm can use advertising to exploit consumer status concerns by increasing the stigma of those who don't buy and promoting widespread recognition for those who do.
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Advertising and Market Structure in the US Mutual Fund Industry
TL;DR: The authors empirically investigated the role played by advertising in determining market structures in various segments of the US mutual fund industry and found that advertising played an important role in determining the market structure of various segments.
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TL;DR: In this article, the authors consider the issue of trademark dilution in comparative advertising and propose a metric for assessing admissibility of appropriation taking into account both the trademark owner's and the advertising competitor's cost benefit ratio.
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Caught in a stranglehold? advertising: what else?
TL;DR: In this article, the authors analyze a quality signaling problem by a monopoly introducing a new experience good, where a high quality type aims to signal itself to consumers but can be imitated by a low quality type with either a low or a high cost.
References
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Avinash Dixit,Joseph E. Stiglitz +1 more
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