Informative advertising and the Unitd States personal computer market: A structural
empirical examination
Опубликовано на портале: 25-12-2003
2002
Aннотация:
“he who has a product to sell and goes and whispers in a well is not
so apt to get the dollars as one who climbs up a tree and hollers”
—Author unknown Traditional models of consumer choice assume consumers are
aware of all products in the market. This assumption is questionable, especially
when applied to markets characterized by a high degree of change. In this study,
I present an empirical discrete-choice model of incomplete information on the part
of consumers—consumers may not be aware of all the products for sale in the
industry. I model the probability a consumer knows a product as a function of advertising,
consumer attributes, and product attributes. I apply the model to the US market for
personal computers (PC). The PC industry is a rapidly changing industry. On average
over 200 new products are introduced by the top 15 firms alone every year. The structural
model encompasses both consumer and firm optimal decisions treating advertising as
influencing the set of products from which the consumer chooses to purchase. The
impact of advertising on a consumer's ‘choice set’ depends on the characteristics
of the consumer and the medium in which the advertising appears. The estimation technique
incorporates micro- and macro-level data. I use data on PC purchases, advertising
expenditures, and media exposure gathered from three different sources. The estimates
indicate that product characteristics, such as whether the computer has a Pentium
chip, its CPU speed, and whether it is a laptop, have a significant positive effect
on utility. The product characteristic driving substitution patterns, for all but
Apple computers, is the form-factor (eg laptop). The estimates indicate there are
increasing returns to advertising and that PC firms use advertising to target high-income
households. For some firms advertising one product has positive effects on other
products sold by that firm (relative to rival products). In addition, word-of-mouth
or experience plays a large role in informing consumers. The average markup over
marginal costs is 34%. While the top 5 firms have higher than average markups, charge
higher than average prices, and engage in higher than average advertising. Results
from merger simulations indicate that, should firms be banned from changing their
advertising levels, industry prices would be lower.
