Adaptive Aspirations and Contributions to a Public Good: Generic Advertising as a Response to Decline

Posted: 24 Mar 2003

See all articles by Sandeep Krishnamurthy

Sandeep Krishnamurthy

University of Washington, Bothell - E-Commerce and Marketing

William P. Bottom

Washington University in St. Louis - John M. Olin Business School

Ambar G. Rao

Washington University in St. Louis - John M. Olin Business School

Abstract

Generic advertising, the promotion of an entire product or service category, is an increasingly common form of inter-firm cooperation. Voluntary participation in such a campaign represents contribution to a public good. Based on the pattern of recent campaigns, we argue that this cooperation is dependent on adaptive aspirations and an increased willingness to tolerate social risk in light of declining sales. Three experiments are reported that tested these ideas. In each study, subjects assigned to four person groups chose how many resources to contribute to a generic advertising campaign the effectiveness of which depended on total funding levels. Each group member represented a different "store" in the same mall. The instructions framed the problem by presenting varying sales trends for the stores - Positive, Negative, or Neutral. The first two experiments were one-shot games with a dominant strategy of non-contribution and free riding. The results showed that subjects confronting the declining trend contributed significantly more than those in either of the other two conditions. Sales history framing actually created a focal point because it also positively influenced their expectations that others would contribute as well. The third experiment demonstrated that this decline-induced focal equilibrium persists over trials of a finitely repeated game with a known stopping point. Contribution levels in the negative history condition dropped only in the final trial. Even in the very last round they remained higher than those for any of the other conditions. Surprisingly, the specific introduction of a competitor mall as the cause of the decline in sales actually resulted in lower levels of contribution. The implications for research and practice are discussed.

Keywords: Generic advertising, public goods, adaptive aspirations

Suggested Citation

Krishnamurthy, Sandeep and Bottom, William P. and Rao, Ambar G., Adaptive Aspirations and Contributions to a Public Good: Generic Advertising as a Response to Decline. Organizational Behavior and Human Decision Processes, Available at SSRN: https://ssrn.com/abstract=329301

Sandeep Krishnamurthy

University of Washington, Bothell - E-Commerce and Marketing ( email )

Business Administration Program, UW-1-233
18115, Campus Way NE
Bothell, WA Washington State 98011
United States
(425) 352 5229 (Phone)
(425) 352 5277 (Fax)

HOME PAGE: http://faculty.washington.edu/sandeep

William P. Bottom (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6351 (Phone)
314-935-6359 (Fax)

HOME PAGE: http://www.olin.wustl.edu/faculty/bottom.html

Ambar G. Rao

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-4515 (Phone)
314-935-6359 (Fax)

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