Price Advertising by Manufacturers and Dealers

Forthcoming, Management Science

40 Pages Posted: 8 Feb 2011 Last revised: 29 Aug 2014

See all articles by Linli Xu

Linli Xu

University of Minnesota - Twin Cities - Carlson School of Management

Kenneth C. Wilbur

University of California, San Diego (UCSD) - Rady School of Management

Sivaramakrishnan Siddarth

University of Southern California - Marketing Department

Jorge M. Silva-Risso

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Date Written: March 28, 2014

Abstract

The central prediction of the current paper is that manufacturer price advertising may be a less effective tool for influencing demand than retailer price advertising. We manipulate the source of a price advertisement in an experiment run on a sample of pick-up truck owners. Manufacturer price advertising leads to lower indicators of potential demand than dealer price advertising, even among consumers who are experienced with the brand. An econometric analysis of pick-up truck sales, price and advertising data shows that this effect is large enough to detect in market data. Manufacturer and dealer price advertising both increase the demand intercept and the responsiveness of demand to price, but the effects of dealer price advertising are larger. Although dealer price advertising is more effective than manufacturer price advertising, manufacturer price advertising may still be useful to reduce channel conflict.

The appendices for this paper are available at the following URL: http://ssrn.com/abstract=2488824

Keywords: Advertising, Automobiles, Channels, Choice Modeling, Demand Estimation, Experiment

Suggested Citation

Xu, Linli and Wilbur, Kenneth C. and Siddarth, Sivaramakrishnan and Silva-Risso, Jorge M., Price Advertising by Manufacturers and Dealers (March 28, 2014). Forthcoming, Management Science. Available at SSRN: https://ssrn.com/abstract=1756845 or http://dx.doi.org/10.2139/ssrn.1756845

Linli Xu

University of Minnesota - Twin Cities - Carlson School of Management ( email )

321 - 19th Avenue South
Minneapolis, MN 55455
United States

Kenneth C. Wilbur (Contact Author)

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

HOME PAGE: http://kennethcwilbur.com

Sivaramakrishnan Siddarth

University of Southern California - Marketing Department ( email )

Hoffman Hall 701
Los Angeles, CA 90089-1427
United States

Jorge M. Silva-Risso

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States

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