Advertising and Quality: An Empirical Analysis

Posted: 1 Jul 1998

See all articles by Sridhar Moorthy

Sridhar Moorthy

University of Toronto - Rotman School of Management

Hao Zhao

affiliation not provided to SSRN

Date Written: April 1996

Abstract

In this paper we examine the relationship between product quality and advertising expenditures empirically. Unlike previous works in the literature, we explicitly distinguish between objective quality and (consumer) perceived quality. In fifteen product classes, five frequently purchased and ten durable goods, we find virtually no relationship between advertising expenditures and objective quality (as measured by Consumer Reports) after accounting for price and market share. However, advertising spending influences consumers perceptions of quality positively, especially for frequently purchased goods, even after accounting for objective quality, price, and market share. These results suggest that advertising plays an important role in shaping consumers quality perceptions merely by exposing them to the brand name.

JEL Classification: L15, M37, C21

Suggested Citation

Moorthy, Sridhar and Zhao, Hao, Advertising and Quality: An Empirical Analysis (April 1996). Working Paper MS 95-04. Available at SSRN: https://ssrn.com/abstract=7383

Sridhar Moorthy (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

HOME PAGE: http://www.rotman.utoronto.ca/~moorthy

Hao Zhao

affiliation not provided to SSRN

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