Empirically Distinguishing Informative and Prestige Effects of Advertising

Daniel Ackerberg

RAND Journal of Economics, 2001, vol. 32, issue 2, 316-33

Abstract: This article introduces techniques to empirically distinguish different effects of brand advertising in nondurable, experience goods markets. I argue that advertisements that give consumers product information should primarily affect consumers who have never tried the brand, whereas advertisements that create prestige or image effects should affect both inexperienced and experienced users. I apply this empirical argument to consumer-level data on purchases of a newly introduced brand of yogurt. Empirical results indicate that the advertisements for this brand primarily affect inexperienced users of the brand. I conclude that the primary effect of these advertisements was that of informing consumers. Copyright 2001 by the RAND Corporation.

Date: 2001
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