A model of advertising format competition: on the use of celebrities in ads

Robert Clark and Ignatius Horstmann

Canadian Journal of Economics, 2013, vol. 46, issue 4, 1606-1630

Abstract: We develop a model that endogenizes both advertising format ads with or without celebrity endorsements and the endorsement fee. Marketing studies suggest that celebrities enhance brand recall and perception of product value. In our model, ads featuring celebrities occur when the product market is large endorsements are likely for products sold nationally and when products are sufficiently similar that the persuasive character of advertising looms large in demand running shoes, beauty products, soft drinks, for example. Celebrity endorsement fees are increasing in market size and in the degree of similarity of the products being advertised.

Date: 2013
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