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Advertising, Quality and Sales

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Author Info
Paton, David

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Abstract

This paper investigates claims that firm-specific effects in advertising-sales models can be attributed to a positive correlation between advertising and product quality. Using a standard Koyck transformation on an unbalanced panel dataset of UK firms, the implied long-lasting effects of advertising disappear when firm-specific effects are taken into account. This conclusion is robust to various econometric approaches. However, when the firm-specific effects are retrieved, they are found to correlate strongly with mean advertising. There is no discernible link between the firm-specific effects and whether a firm perceives quality to be an important form of competition in its market. The results give no support to the idea that advertising affects sales through associated product quality. They are consistent with the persistence of advertising within firms over time. Copyright 2002 by Taylor and Francis Group

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 34 (2002)
Issue (Month): 4 (March)
Pages: 431-38
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Handle: RePEc:taf:applec:v:34:y:2002:i:4:p:431-38

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  1. Vicente Esteve & Francisco Requena, 2006. "A Cointegration Analysis of Car Advertising and Sales Data in the Presence of Structural Change," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 13(1), pages 111-128, February. [Downloadable!] (restricted)
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