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Advertising, quality and sales

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  • David Paton

Abstract

This paper investigates claims that firm-specific effects in advertising-sales models can be attributed to a positive correlation between advertising and product quality. Using a standard Koyck transformation on an unbalanced panel dataset of UK firms, the implied long-lasting effects of advertising disappear when firm-specific effects are taken into account. This conclusion is robust to various econometric approaches. However, when the firm-specific effects are retrieved, they are found to correlate strongly with mean advertising. There is no discernible link between the firm-specific effects and whether a firm perceives quality to be an important form of competition in its market. The results give no support to the idea that advertising affects sales through associated product quality. They are consistent with the persistence of advertising within firms over time.

Suggested Citation

  • David Paton, 2002. "Advertising, quality and sales," Applied Economics, Taylor & Francis Journals, vol. 34(4), pages 431-438.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:4:p:431-438
    DOI: 10.1080/00036840110046025
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    References listed on IDEAS

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    1. Gerosky, P A & Pomroy, R, 1990. "Innovation and the Evolution of Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 38(3), pages 299-314, March.
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    5. Ram C. Rao, 1986. "Estimating Continuous Time Advertising-Sales Models," Marketing Science, INFORMS, vol. 5(2), pages 125-142.
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    Cited by:

    1. Doug J. Chung & Byungyeon Kim & Byoung G. Park, 2019. "How Do Sales Efforts Pay Off? Dynamic Panel Data Analysis in the Nerlove–Arrow Framework," Management Science, INFORMS, vol. 65(11), pages 5197-5218, November.
    2. Vicente Esteve & Francisco Requena, 2006. "A Cointegration Analysis of Car Advertising and Sales Data in the Presence of Structural Change," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(1), pages 111-128.
    3. 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, vol. 59(2), pages 163-180.

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