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Advertising, Competition, and Market Share Instability

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  • Eckard, E Woodrow, Jr

Abstract

This paper tests the hypothesis that advertising reduces leading-firm market-share instability (a proxy for interfirm rivalry) by creating market power. If advertising increases product differentiation and brand loyalty, then it also reduces demand cross elasticities and stabilizes shares. Changes over time in the combined market shares of the top four firms are examined for a large sample of four-digit Standard Industrial Classification manufacturing indust ries for 1963-82. Multiple regression equations are used to explain s hare instability, measured as deviations both about the simple mean a nd about a linear time trend. The results indicate that advertising d oes not reduce market share instability. Copyright 1987 by the University of Chicago.

Suggested Citation

  • Eckard, E Woodrow, Jr, 1987. "Advertising, Competition, and Market Share Instability," The Journal of Business, University of Chicago Press, vol. 60(4), pages 539-552, October.
    • Handle: RePEc:ucp:jnlbus:v:60:y:1987:i:4:p:539-52
    DOI: 10.1086/296412
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    Cited by:

    1. Chiang-Ming Chen & Yu-Chen Lin & Ho-Wen Yang, 2017. "The effect of advertising on market share instability in the hotel industry," Tourism Economics, , vol. 23(1), pages 214-222, February.
    2. Willem F. J. Buijink & Steven J. Maijoor & Roger H. G. Meuwissen, 1998. "Competition in Auditing: Evidence from Entry, Exit, and Market Share Mobility in Germany versus The Netherlands," Contemporary Accounting Research, John Wiley & Sons, vol. 15(3), pages 385-404, September.
    3. Chung, Kee H. & Kim, Youngsoo, 2005. "The dynamics of dealer markets and trading costs," Journal of Banking & Finance, Elsevier, vol. 29(12), pages 3041-3059, December.
    4. Yuji Honjo & Noriyuki Doi & Yasushi Kudo, 2018. "The Turnover of Market Leaders in Growing and Declining Industries: Evidence from Japan," Journal of Industry, Competition and Trade, Springer, vol. 18(2), pages 121-138, June.
    5. Sumit K. Majumdar & Davina Vora & Ashok K. Nag, 2010. "Industry Structure Characteristics and International Entrepreneurship in India’s Software Industry," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 19(2), pages 109-136, September.
    6. Yajie Chen & Qinlin Zhong & Fuxiu Jiang, 2020. "The capital market spillover effect of product market advertising: Evidence from stock price synchronicity," Frontiers of Business Research in China, Springer, vol. 14(1), pages 1-21, December.

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