Essays on the role of advertising in product markets
Abstract/Contents
- Abstract
- This thesis studies the role of advertising in product markets and the mechanisms by which advertising affects consumers' purchase decisions. The first chapter explores the effects of e-cigarette advertising on demand for traditional cigarettes and contributes to the current policy debate as to whether e-cigarette TV advertising should be banned, as is TV advertising for tobacco cigarettes. To analyze this question, I leverage access to county-level sales and advertising data on cigarettes and related tobacco products, along with detailed data on the consumption behavior of a panel of households. Using both descriptive and structural methods, I show evidence that e-cigarette advertising reduces demand for tobacco cigarettes. In a policy-relevant counterfactual analysis, I predict that an e-cigarette advertising ban would increase demand for cigarettes by 3%, suggesting that a ban on e-cigarette advertising may have unintended consequences. Chapter 2, which is a joint project with Harikesh Nair and Pedro Gardete, explores new opportunities for ad targeting based on the past consumption of both products and ads. The standard paradigm in the empirical literature is to treat consumers as passive recipients of advertising, but this paradigm ignores the fact that consumers may actively choose their consumption of advertising. Becker and Murphy (1993) recognized this aspect of demand for advertising and argued that advertising should be treated as a good in consumers' utility functions, thereby effectively creating a role for consumer choice over advertising consumption. They argued that in many cases demand for advertising and demand for products may be linked by complementarities in joint consumption. We analyze an unusually rich dataset that links the TV ad consumption behavior of a panel of consumers with their product choice behavior over a long time horizon. In a series of descriptive analyses, we show that the data suggests an active role for consumer choice over ads and for complementarities in joint demand. To interpret the patterns in the data, we fit a structural model for both products and advertising consumption that allows for such complementarities. Interpreting the data through the lens of the model enables us to precisely characterize the treatment effect of advertising under endogenous non-compliance and assess the returns to targeting advertising based on endogenous past consumption. To illustrate the value of the model, we compare advertising, prices and consumer welfare to a series of counterfactual scenarios motivated by the ``addressable'' future of TV ad-markets in which targeting advertising and prices on the basis of ad-viewing and product purchase behavior is possible. We find that both profits and net consumer welfare may increase, suggesting that it may be possible that both firms and consumers become better off in the new addressable TV environments.
Description
| Type of resource | text |
|---|---|
| Form | electronic; electronic resource; remote |
| Extent | 1 online resource. |
| Publication date | 2016 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Associated with | Tuchman, Anna |
|---|---|
| Associated with | Stanford University, Graduate School of Business. |
| Primary advisor | Nair, Harikesh S. (Harikesh Sasikumar), 1976- |
| Thesis advisor | Nair, Harikesh S. (Harikesh Sasikumar), 1976- |
| Thesis advisor | Hartmann, Wesley R. (Wesley Robert), 1973- |
| Thesis advisor | Sahni, Navdeep |
| Advisor | Hartmann, Wesley R. (Wesley Robert), 1973- |
| Advisor | Sahni, Navdeep |
Subjects
| Genre | Theses |
|---|
Bibliographic information
| Statement of responsibility | Anna Tuchman. |
|---|---|
| Note | Submitted to the Graduate School of Business. |
| Thesis | Thesis (Ph.D.)--Stanford University, 2016. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2016 by Anna Elizabeth Tuchman
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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