Empirical Essays on Advertising Content

Liaukonyte, Jurate, Department of Economics, University of Virginia
Anderson, Simon, Department of Economics, University of Virginia

An important limitation of research on advertising effects is disregarding the advertising content. The three essays in this dissertation incorporate information from the content of advertising into the analysis of the competition patterns in the OTC analgesics market. The first essay bridges the gap between the existing marketing literature on content analysis and recent research that incorporates advertising content into models of strategic firm and consumer behavior. We find that comparative advertising has more information cues than non - comparative, and brands tend to specialize in which characteristics they advertise the most. Search attributes are scarcely advertised, and claims mostly involve experience attributes. Contrary to the conventional marketing wisdom, the leading brand does engage in some comparative advertising. The second essay examines the role of advertising in product differentiation, with a special emphasis on the role of comparative advertising. This essay is the first known attempt to incorporate the content of advertising into a structural demand model. I separate the effects of comparative and noncomparative advertising on demand. The results show that advertising and, especially, comparative advertising is a fruitful strategy for competing firms to differentiate their products and reduce a competitor's market share. The empirical findings also indicate that comparative advertising is very effective at denigrating the perceived quality of rival's brand. The last essay studies the supply side of the market: brands' optimal choices of advertising mix and incentives to use comparative advertising. The essay looks at two effects of advertising: (1) promotion of one's own product which in turn increases demand directly (the "push effect"), achieved through the use of noncomparative or comparative advertising, and (2) denigration of a rival with comparative advertising (the "pull effect") which in turn helps a firm indirectly by decreasing the perceived rival quality. We find that comparative advertising is less effective at pushing up than is noncomparative advertising, while the pulling down effect does hurt rivals quite substantially. These results are broadly consistent with the theoretical "push - pull" model that frames the strategic interaction in the market.

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PHD (Doctor of Philosophy)
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