The Impact of Advertising on Consumer Price Sensitivity in Experience Goods Markets

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Show simple item record Erdem, Tulin en_US Keane, Michael en_US Sun, Baohong en_US
dc.contributor.editor en_US 2010-05-28T09:53:31Z 2010-05-28T09:53:31Z 2008 en_US
dc.identifier 2007002016 en_US
dc.identifier.citation Erdem Tulin, Keane Michael, and Sun Baohong 2008, 'The Impact of Advertising on Consumer Price Sensitivity in Experience Goods Markets', Springer, vol. 6, no. 2, pp. 139-176. en_US
dc.identifier.issn 1570-7156 en_US
dc.identifier.other C1 en_US
dc.description.abstract In this paper we use Nielsen scanner panel data on four categories of consumer goods to examine how TV advertising and other marketing activities affect the demand curve facing a brand. Advertising can affect consumer demand in many different ways. Becker and Murphy (Quarterly Journal of Economics 108:941?964, 1993) have argued that the ?presumptive case? should be that advertising works by raising marginal consumers? willingness to pay for a brand. This has the effect of flattening the demand curve, thus increasing the equilibrium price elasticity of demand and the lowering the equilibrium price. Thus, ?advertising is profitable not because it lowers the elasticity of demand for the advertised good, but because it raises the level of demand.? Our empirical results support this conjecture on how advertising shifts the demand curve for 17 of the 18 brands we examine. There have been many prior studies of how advertising affects two equilibrium quantities: the price elasticity of demand and/or the price level. Our work is differentiated from previous work primarily by our focus on how advertising shifts demand curves as a whole. As Becker and Murphy pointed out, a focus on equilibrium prices or elasticities alone can be quite misleading. Indeed, in many instances, the observation that advertising causes prices to fall and/or demand elasticities to increase, has misled authors into concluding that consumer ?price sensitivity? must have increased, meaning the number of consumers? willing to pay any particular price for a brand was reduced?perhaps because advertising makes consumers more aware of substitutes. en_US
dc.language en_US
dc.publisher Springer en_US
dc.relation.isbasedon en_US
dc.title The Impact of Advertising on Consumer Price Sensitivity in Experience Goods Markets en_US
dc.parent Quantitative Marketing and Economics en_US
dc.journal.volume 6 en_US
dc.journal.number 2 en_US
dc.publocation USA en_US
dc.identifier.startpage 139 en_US
dc.identifier.endpage 176 en_US BUS.School of Finance and Economics en_US
dc.conference Verified OK en_US
dc.for 150505 en_US
dc.personcode 0000017748 en_US
dc.personcode 998871 en_US
dc.personcode 0000041615 en_US
dc.percentage 100 en_US Marketing Research Methodology en_US
dc.classification.type FOR-08 en_US
dc.edition en_US
dc.custom en_US en_US
dc.location.activity en_US
dc.description.keywords Advertising - Consumer price sensitivity - Brand choice en_US

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