Some observations on the impact of advertising on demand

Authors

  • Jonq-Ying Lee,

    Research Economist
    1. Florida Department of Citrus, and Adjunct Professor and Adjunct Associate Professor, Food and Resource Economics Department, University of Florida
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  • Mark G. Brown,

    Research Economist
    1. Florida Department of Citrus, and Adjunct Professor and Adjunct Associate Professor, Food and Resource Economics Department, University of Florida
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  • Gary F. Fairchild

    Associate Professor
    1. Food and Resource Economics Department, University of Florida
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Abstract

This article examines the decay structure of advertising and the incorporation of advertising in systems of demand equations by scaling and translating methods. Under the assumption that a consumer's purchase of an advertised product is directly related to his/her recall of a specific advertisement, the decay effect of advertising for everyday products is a monotonic decreasing function of time. In the scaling model, advertising has a tendency to be more effective when demand is price elastic (inelastic) given a quantity augmenting (diminishing) type scaling impact. In the translating model, the impact of advertising is related to the marginal propensity to consume.

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