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Estimating the Value of Advertising

Ralf Dewenter
University of the Federal Armed Forces Hamburg - Department of Economics

June 2003

University FAF Economics Discussion Paper No. 12

Abstract:
Mass media are characterized by at least two interrelated markets. Therefore, the media firm has to satisfy two interdependent demands, the demand for magazines and the demand for advertising. The utility of the readers is affected by the information of the editorial and the advertising share. The advertising customers in contrast, are interested in the quality and quantity of the target group. The present paper analyzes both the marginal willingness to pay of readers for advertising and the marginal willingness to pay of advertising customers for sociodemographic attributes of the readers. Using the hedonic price approach the shadow prices are calculated using simple OLS and the Box-Cox regressions. Subsequently, because of the interrelationship of the demands, both markets are modeled simultaneously using 2SLS techniques.

Keywords: Mass-media, magazines, hedonic prices, box-cox approach

JEL Classifications: C21, D12, L82

Working Paper Series

Date posted: September 05, 2003 ; Last revised: April 12, 2004

Suggested Citation

Dewenter, Ralf, Estimating the Value of Advertising (June 2003). University FAF Economics Discussion Paper No. 12. Available at SSRN: http://ssrn.com/abstract=429500 or doi:10.2139/ssrn.429500

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Contact Information

Ralf Dewenter (Contact Author)

University of the Federal Armed Forces Hamburg - Department of Economics ( email )

Holstenhofweg 85
22043 Hamburg Germany