Advertising, Consumer Awareness, and Choice: Evidence from the U.S. Banking Industry

56 Pages Posted: 17 Sep 2015 Last revised: 10 Nov 2016

See all articles by Elisabeth Honka

Elisabeth Honka

University of California, Los Angeles (UCLA) - Anderson School of Management

Ali Hortacsu

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Maria Ana Vitorino

INSEAD; University of Minnesota - Carlson School of Management

Date Written: August 24, 2016

Abstract

How does advertising influence consumer decisions and market outcomes? We utilize detailed data on consumer shopping behavior and choices over bank accounts to investigate the effects of advertising on the different stages of the shopping process: awareness, consideration, and choice. We formulate a structural model with costly search and endogenous consideration sets, and show that advertising in the U.S. banking industry is primarily a shifter of awareness as opposed to consideration or choice. Advertising makes consumers aware of more options, search more and find better alternatives. This increases the market share of smaller banks and makes the industry more competitive.

Keywords: advertising, banking industry, consumer search, demand estimation

JEL Classification: D43, D83, L13

Suggested Citation

Honka, Elisabeth and Hortacsu, Ali and Vitorino, Maria Ana, Advertising, Consumer Awareness, and Choice: Evidence from the U.S. Banking Industry (August 24, 2016). Available at SSRN: https://ssrn.com/abstract=2661659 or http://dx.doi.org/10.2139/ssrn.2661659

Elisabeth Honka (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Ali Hortacsu

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States
773-702-5841 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Maria Ana Vitorino

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

HOME PAGE: http://www.maria-ana-vitorino.com/home.html

University of Minnesota - Carlson School of Management ( email )

3-150 Carlson School of Management
321 - 19th Avenue South
Minneapolis, MN 55455
United States

HOME PAGE: http://www.maria-ana-vitorino.com/home.html

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