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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Journal ArticleDOI
Effect of Advertising Expenses and Sales Incentives on Financial Performance: Dissecting the Cases of Two Market Leaders
Madhobi Hossain,Tiasha Islam +1 more
TL;DR: In this article, the authors examined the effect of advertising and sales incentives on the revenue and profit of Grameenphone and bKash, who are the market leaders in their respective industries of Bangladesh.
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Product market advertising and corporate bonds
TL;DR: In this article, the authors find that although greater advertising by a firm improves liquidity of its bonds in the market, it does not lower the firm's cost of debt, and that firms with ineffective advertising experience reduced bond market liquidity and a higher costs of debt.
Platform Competition and Welfare: Media Markets Reconsidered
Attila Ambrus,Markus Reisinger +1 more
TL;DR: In this paper, a model of broadcast competition where viewers dislike advertising while producers want to reach many viewers with their commercials is presented, and the authors show that this leads to clear cut welfare results.
Journal ArticleDOI
Do Brand Advertising Spillovers Matter
Xun Li,Rigoberto A. Lopez +1 more
TL;DR: In this paper, the authors examined the spillover effects of television brand advertising on consumer demand, using carbonated soft drinks as a case study, using linear and constant elasticity of substitution (CES) advertising production functions.
Posted Content
From Advert to Action: Behavioural Insights into the Advertising of Financial Products
Paul Adams,Laura Smart +1 more
TL;DR: In this paper, the authors explore the mechanisms behind consumer attention, understanding, and behaviour in financial advertising and build this into a framework for understanding how consumers process information in the form of advertisements, divided into three stages: See, Interpret and Act.
References
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