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Price Advertising by Manufacturers and Dealers

Author

Listed:
  • Linli Xu

    (Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455)

  • Kenneth C. Wilbur

    (Rady School of Management, University of California, San Diego, La Jolla, California 92093)

  • S. Siddarth

    (Marshall School of Business, University of Southern California, Los Angeles, California 90089)

  • Jorge M. Silva-Risso

    (A. Gary Anderson Graduate School of Management, University of California, Riverside, Riverside, California 92521)

Abstract

The central prediction of the current paper is that manufacturer price advertising may be a less effective tool for influencing demand than retailer price advertising. We manipulate the source of a price advertisement in an experiment run on a sample of pickup truck owners. Manufacturer price advertising leads to lower indicators of potential demand than dealer price advertising, even among consumers who are experienced with the brand. An econometric analysis of pickup truck sales, price, and advertising data shows that this effect is large enough to detect in market data. Manufacturer and dealer price advertising both increase the demand intercept and the responsiveness of demand to price, but the effects of dealer price advertising are larger. Although dealer price advertising is more effective than manufacturer price advertising, manufacturer price advertising may still be useful to reduce channel conflict. This paper was accepted by Pradeep Chintagunta, marketing.

Suggested Citation

  • Linli Xu & Kenneth C. Wilbur & S. Siddarth & Jorge M. Silva-Risso, 2014. "Price Advertising by Manufacturers and Dealers," Management Science, INFORMS, vol. 60(11), pages 2816-2834, November.
    • Handle: RePEc:inm:ormnsc:v:60:y:2014:i:11:p:2816-2834
    DOI: 10.1287/mnsc.2014.1969
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    References listed on IDEAS

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    2. Chadwick J. Miller & Daniel C. Brannon & Jim Salas & Martha Troncoza, 2021. "Advertising, incentives, and the upsell: how advertising differentially moderates customer- vs. retailer-directed price incentives’ impact on consumers’ preferences for premium products," Journal of the Academy of Marketing Science, Springer, vol. 49(6), pages 1043-1064, November.
    3. Rex Yuxing Du & Mingyu Joo & Kenneth C. Wilbur, 2019. "Advertising and brand attitudes: Evidence from 575 brands over five years," Quantitative Marketing and Economics (QME), Springer, vol. 17(3), pages 257-323, September.
    4. Shi, Hongyan & Liu, Yunchuan & Petruzzi, Nicholas C., 2019. "Informative advertising in a distribution channel," European Journal of Operational Research, Elsevier, vol. 274(2), pages 773-787.
    5. Linli Xu & Jorge M. Silva-Risso & Kenneth C. Wilbur, 2018. "Dynamic Quality Ladder Model Predictions in Nonrandom Holdout Samples," Management Science, INFORMS, vol. 64(7), pages 3187-3207, July.
    6. Murry, Charles, 2018. "The effect of retail competition on relationship-specific investments: evidence from new car advertising," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 253-281.
    7. Yang, Yupin & Lu, Qiang (Steven) & Tang, Guanting & Pei, Jian, 2015. "The Impact of Market Competition on Search Advertising," Journal of Interactive Marketing, Elsevier, vol. 30(C), pages 46-55.
    8. Niu, Baozhuang & Yu, Xinhu & Li, Qiyang & Wang, Yulan, 2023. "Gains and Losses of Key Opinion Leaders’ Product Promotion in Livestream E-commerce," Omega, Elsevier, vol. 117(C).
    9. Guitart, Ivan A. & Gonzalez, Jorge & Stremersch, Stefan, 2018. "Advertising non-premium products as if they were premium: The impact of advertising up on advertising elasticity and brand equity," International Journal of Research in Marketing, Elsevier, vol. 35(3), pages 471-489.
    10. Joo, Mingyu & Wilbur, Kenneth C. & Zhu, Yi, 2016. "Effects of TV advertising on keyword search," International Journal of Research in Marketing, Elsevier, vol. 33(3), pages 508-523.
    11. Jura Liaukonyte & Thales Teixeira & Kenneth C. Wilbur, 2015. "Television Advertising and Online Shopping," Marketing Science, INFORMS, vol. 34(3), pages 311-330, May.
    12. Rex Yuxing Du & Mingyu Joo & Kenneth C. Wilbur, 2018. "Advertising and Brand Attitudes: Evidence from 575 Brands over Five Years," Papers 1810.07783, arXiv.org.
    13. Ivan Guitart & Jorge Gonzalez & Stefan Stremersch, 2018. "Advertising non-premium products as if they were premium : The impact of advertising up on advertising elasticity and brand equity," Post-Print hal-02312175, HAL.

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