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Seasonality and the Effect of Advertising on Price
Author(s) -
Genesove David,
Simhon Avi
Publication year - 2015
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12067
Subject(s) - imperfect , seasonality , exploit , advertising , product (mathematics) , economics , estimation , econometrics , business , computer science , mathematics , statistics , philosophy , linguistics , geometry , computer security , management
Does advertising make markets more or less competitive? This paper lays out an econometric strategy for estimating the effect of advertising on prices that exploits seasonal demand and imperfect targeting of consumers. We find mostly negligible effects of advertising on prices at monthly frequency: among the 35 (of 131) product categories with sufficient advertising seasonality to justify second‐stage estimation, only nine have a significant effect, and those are typically small. This finding is essentially the result of the much greater seasonality in advertising than price.