Goodwill and dynamic advertising strategies
Toker Doganoglu () and
Quantitative Marketing and Economics (QME), 2006, vol. 4, issue 1, 5-29
In this paper, we empirically analyze weekly advertising policies of manufacturing firms in consumer goods markets. We assume firms engage in persuasive advertising, thus policies of firms affect the goodwill of a brand. We introduce a demand and a goodwill production function. A simple transformation of the demand function allows us to identify not only the demand parameters but also the parameters of the goodwill production function. We reconstruct the unobserved goodwill levels using these parameters and past advertising levels. We restrict our attention to Markov Perfect Equilibrium (MPE) strategies which are functions of payoff relevant state variables. Without imposing further restrictions on the dynamic competitive environment, we investigate the relationship between observed advertising strategies—which are assumed to be MPE—and payoff relevant state variables by means of several reduced form specifications. The most important determinant of advertising intensity turns out to be goodwill. We demonstrate that controlling for an advertising campaign significantly improves the explanatory power of the model. Copyright Springer Science + Business Media, LLC 2006
Keywords: Advertising; Goodwill; Markov perfect equilibrium; Dynamic oligopoly (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:qmktec:v:4:y:2006:i:1:p:5-29
Ordering information: This journal article can be ordered from
http://www.springer. ... ng/journal/11129/PS2
Access Statistics for this article
Quantitative Marketing and Economics (QME) is currently edited by Pradeep Chintagunta
More articles in Quantitative Marketing and Economics (QME) from Springer
Bibliographic data for series maintained by Sonal Shukla ().