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The Sales and Competitive Effects of Styling and Advertising Practices in the U.S. Auto Industry

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  • Kwoka, John E, Jr

Abstract

This paper utilizes a detailed data set on most U.S. car models over a twenty-two-year period to determine the impact of advertising and product styling. It finds that, while advertising and style change each increases a model's sales, advertising is short-lived but styling has a much longer impact. Rivals' styling reduces own-model sales to the point that the overall market effect is self-canceling. Rivals' advertising, by contrast, does not greatly affect own sales, so that marketwide advertising does increase total sales. These results add several twists to previous analyses of this industry. Copyright 1993 by MIT Press.

Suggested Citation

  • Kwoka, John E, Jr, 1993. "The Sales and Competitive Effects of Styling and Advertising Practices in the U.S. Auto Industry," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 649-656, November.
  • Handle: RePEc:tpr:restat:v:75:y:1993:i:4:p:649-56
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    Cited by:

    1. Korenok, Oleg & Hoffer, George E. & Millner, Edward L., 2010. "Non-price determinants of automotive demand: Restyling matters most," Journal of Business Research, Elsevier, vol. 63(12), pages 1282-1289, December.
    2. Ana M. Aizcorbe & Martha Starr-McCluer & James T. Hickman, 2003. "The replacement demand for motor vehicles: evidence from the Survey of Consumer Finances," Finance and Economics Discussion Series 2003-44, Board of Governors of the Federal Reserve System (U.S.).
    3. Matthias Greuner & David Kamerschen & Peter Klein, 2000. "The Competitive Effects of Advertising in the US Automobile Industry, 1970-94," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 7(3), pages 245-261.
    4. David A. Soberman, 2004. "Research Note: Additional Learning and Implications on the Role of Informative Advertising," Management Science, INFORMS, pages 1744-1750.
    5. repec:rdg:wpaper:em-dp2008-56 is not listed on IDEAS
    6. González, Eduardo & Cárcaba, Ana & Ventura, Juan, 2015. "How car dealers adjust prices to reach the product efficiency frontier in the Spanish automobile market," Omega, Elsevier, vol. 51(C), pages 38-48.
    7. Requena-Silvente, Francisco & Walker, James, 2007. "Investigating sales and advertising rivalry in the UK multipurpose vehicle market (1995-2002)," Journal of Economics and Business, Elsevier, pages 163-180.
    8. Larkin, Yelena, 2013. "Brand perception, cash flow stability, and financial policy," Journal of Financial Economics, Elsevier, vol. 110(1), pages 232-253.
    9. Peter Scott & James Walker, 2010. "Sales and Advertising Rivalry in Interwar US Department Stores," Economics & Management Discussion Papers em-dp2009-05, Henley Business School, Reading University.
    10. Nichols, Mark W. & Fournier, Gary M., 1999. "Recovering from a bad reputation: changing beliefs about the quality of U.S. autos," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 299-318, April.

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