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Generic Advertising; and the Structural Heterogeneity Hypothesis
Author(s) -
Kinnucan Henry W.,
Venkateswaran Meenakshi
Publication year - 1994
Publication title -
canadian journal of agricultural economics/revue canadienne d'agroeconomie
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 37
eISSN - 1744-7976
pISSN - 0008-3976
DOI - 10.1111/j.1744-7976.1994.tb00032.x
Subject(s) - heteroscedasticity , econometrics , normative , normality , theme (computing) , random effects model , economics , sample (material) , estimation , computer science , statistics , mathematics , meta analysis , medicine , philosophy , chemistry , management , epistemology , chromatography , operating system
This paper adduces and tests the hypothesis that generic advertising responses are dynamic, i.e., are subject to change over time due to changes in target audiences, managerial expertise, copy quality or other time‐related factors. Specifically, the authors consider the structural heterogeneity hypothesis from the perspective of three alternative econometric models that permit random and systematic time‐varying response: the Prescott‐Cooley model, the return‐to‐normality model, and the stochastic‐trend model. A distinguishing characteristic of the models is the presence or absence of heteroscedasticity. Based on pretests, which failed to detect heteroscedasticity, a modified version of the stochastic‐trend model is selected for hypothesis testing. Results based on data of the first 15 years of the Ontario fluid milk campaign suggest advertising responses are dynamic. Estimated advertising elasticities decline more or less monotonically over this sample period, from a high of 0.020‐o.031 in the initial 1973–74 theme period, to a low of 0.0004‐0.009 in the final 1986–87 theme period. The apparent declining effectiveness of the Ontario fluid milk campaign is consistent with wearout theory, and suggests that program managers may want to reassess marketing strategies to identify possible ways to improve performance. Given the importance of advertising elasticities in normative decision models and the growing evidence of structural heterogeneity, models that permit parameters to change over time should provide an improved basis for program assessment and resource allocation.