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Advertising and Steiner's Dual Stage Model: Our Assessment

Author

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  • William Comanor
  • Thomas Wilson

Abstract

Between 1967 and 1979, we produced a number of studies that explored different facets of the economics of advertising. This work culminated in our 1974 book entitled Advertising and Market Power. Our leading hypothesis was that heavy advertising expenditures often but not always had anti-competitive effects. And our primary empirical evidence in support of this hypothesis was that industries with heavy advertising expenditures also reported higher profit rates, which we interpreted as indicating that higher prices followed when manufacturers can effectively spend large amounts on advertising. Since that time, Robert Steiner has developed a model of firm behaviour for consumer goods industries. He finds that distribution margins are generally higher where manufacturer prices are lower. Furthermore, heavy manufacturer advertising is likely to depress distribution margins for heavily advertised products. While our earlier work implicitly assumed that distribution margins are generally the same regardless of the volume of advertising, Steiner's results raise doubt on this assumption. Steiner's model must therefore be acknowledged when interpreting our earlier findings.

Suggested Citation

  • William Comanor & Thomas Wilson, 2006. "Advertising and Steiner's Dual Stage Model: Our Assessment," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(1), pages 39-44.
  • Handle: RePEc:taf:ijecbs:v:13:y:2006:i:1:p:39-44
    DOI: 10.1080/13571510500519939
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    More about this item

    Keywords

    Advertising; Steiner's Model; Manufacturers and Distributors; Market Power; Distribution Margins; JEL Classifications: L15; L22;

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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