Abstract

http://ssrn.com/abstract=875396
 
 

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Dynamics of Retail Advertising: Evidence from a Field Experiment


Duncan Simester


Massachusetts Institute of Technology (MIT) - Sloan School of Management

Yu Jeffrey Hu


Georgia Institute of Technology - Scheller College of Business

Erik Brynjolfsson


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Eric Anderson


Northwestern University - Department of Marketing

October 2007

Economic Inquiry, Forthcoming

Abstract:     
We present findings from a controlled field experiment that allows us to investigate the dynamic effects of retail advertising. The experimental design overcomes limitations that have hindered previous investigations of this issue. Our study uncovers dynamic advertising effects that have not been previously considered in the literature. We find that current advertising does affect future sales but surprisingly, the affect is not always positive; for the firm's best customers the long-run outcome may be negative. We argue that this finding reflects two competing effects: brand-switching and intertemporal substitution. The study also provides evidence of cross-channel substitution, with the firm's best customers switching demand to the ordering channel that corresponds to the advertising.

Number of Pages in PDF File: 39

Keywords: Advertising, Direct Mail, Field Experiment, Internet, Catalog, long-run demand

JEL Classification: C93, M31, M37, L81, L15, O30, L2

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Date posted: January 19, 2006 ; Last revised: February 19, 2008

Suggested Citation

Simester, Duncan and Hu, Yu Jeffrey and Brynjolfsson, Erik and Anderson, Eric, Dynamics of Retail Advertising: Evidence from a Field Experiment (October 2007). Economic Inquiry, Forthcoming. Available at SSRN: http://ssrn.com/abstract=875396 or http://dx.doi.org/10.2139/ssrn.875396

Contact Information

Duncan Simester (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
Management Science
Cambridge, MA 02142
United States
617-258-0679 (Phone)
617-258-7597 (Fax)
Yu Jeffrey Hu
Georgia Institute of Technology - Scheller College of Business ( email )
800 West Peachtree St.
Atlanta, GA 30308
United States
Erik Brynjolfsson
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
E53-313
Cambridge, MA 02142
United States
617-253-4319 (Phone)
HOME PAGE: http://digital.mit.edu/erik
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Eric Anderson
Northwestern University - Department of Marketing ( email )
Kellogg School of Management
2001 Sheridan Rd.
Evanston, IL 60208
United States
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