Nonparametric Estimation of Marketing-Mix Effects Using a Regression Discontinuity Design

Wesley Hartmann, Harikesh Nair and Sridhar Narayanan
Additional contact information
Wesley Hartmann: Stanford University
Sridhar Narayanan: Stanford University

Research Papers from Stanford University, Graduate School of Business

Abstract: We discuss how regression discontinuity designs arise naturally in settings where firms target marketing activity at consumers, and discuss how this aspect may be exploited for econometric inference of causal effects of marketing effort. Our main insight is to use commonly observed discreteness and kinks in the heuristics by which firms target such marketing activity to consumers for nonparametric identification. Such kinks, along with continuity restrictions that are typically satisfied in marketing and industrial organization applications, are sufficient for identification of local treatment effects. We review the theory of regression discontinuity estimation in the context of targeting, and explore its applicability to several marketing settings. We discuss identifiability of causal marketing effects using the design, and illustrate theoretically the conditions under which the RD estimator may be valid. Specifically, we argue that consideration of an underlying model of strategic consumer behavior reveals how identification hinges on model features such as the specification and value of structural parameters as well as belief structures. We present two empirical applications: the first, to measuring the effect of casino e-mail promotions targeted to customers based on ranges of their expected profitability; and the second, to measuring the effect of direct mail targeted by a B2C company to zip-codes based on thresholds of expected response. In both cases, we illustrate that exploiting the regression discontinuity design reveals negative effects of the marketing campaigns that would not have been uncovered using other approaches. Our results are nonparameteric, easy to compute, and fully control for the endogeneity induced by the targeting rule.

Date: 2009-11
New Economics Papers: this item is included in nep-ecm and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://gsbapps.stanford.edu/researchpapers/library/RP2039.pdf
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to gsbapps.stanford.edu:443 (Bad file descriptor) (http://gsbapps.stanford.edu/researchpapers/library/RP2039.pdf [302 Found]--> https://gsbapps.stanford.edu/researchpapers/library/RP2039.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:2039

Access Statistics for this paper

More papers in Research Papers from Stanford University, Graduate School of Business Contact information at EDIRC.
Bibliographic data for series maintained by ().