On the Simple Economics of Advertising, Marketing, and Product Design

Justin P. Johnson and David Myatt

American Economic Review, 2006, vol. 96, issue 3, 756-784

Abstract: We propose a framework for analyzing transformations of demand. Such transformations frequently stem from changes in the dispersion of consumers' valuations, which lead to rotations of the demand curve. In many settings, profits are a U-shaped function of dispersion. High dispersion is complemented by niche production, and low dispersion is complemented by mass-market supply. We investigate numerous applications, including product design; advertising, marketing and sales advice; and the construction of quality-differentiated product lines. We also suggest a new taxonomy of advertising, distinguishing between hype, which shifts demand, and real information, which rotates demand. (JEL D8, L1, M3).

Date: 2006
Note: DOI: 10.1257/aer.96.3.756
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (318)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.96.3.756 (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: On the Simple Economics of Advertising, Marketing, and Product Design (2004)
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:aea:aecrev:v:96:y:2006:i:3:p:756-784

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().