An analytical and experimental investigation of issues in the organization of generic advertising campaigns

Persistent Link:
http://hdl.handle.net/10150/289366
Title:
An analytical and experimental investigation of issues in the organization of generic advertising campaigns
Author:
Krishnamurthy, Sandeep, 1967-
Issue Date:
1996
Publisher:
The University of Arizona.
Rights:
Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
Abstract:
Generic advertising campaigns promote the general qualities of a product to customers thus improving the demand of all firms who market that product. Recent national campaigns of this nature include the milk advertising campaign "Got Milk?" and the advertising campaign by florists "Think Flowers." The focus of this dissertation is to study, through analytical modeling and an experimental economics perspective, the strategic issues that arise in the organization of such an advertising campaign. We investigate two mechanisms used in practice--Voluntary Contribution Mechanisms (VCMs) and Mandated Contribution Mechanisms (MCMs). In the former, industry members can decide if they want to participate and if so, how much they wish to contribute. Here, the strategic problem relates to achieving complete participation. Specifically, either "free-rider" or "cheap-rider" equilibria obtain, leading to sub-optimal advertising. In order to overcome this, we propose the Provision Point VCM where the campaign is conducted only if contributions exceed a pre-determined threshold. Here, optimal advertising is always a feasible equilibrium. We experimentally investigated the impact of these two VCMs, face-to-face communication and completeness of information on contributions. Managers with experience in such advertising also participated in our study. The findings from the forty four economic experiments were: (1) Simple VCM led to lower efficiency in comparison to Provision Point VCMs. (2) When the provision point was set at the Pareto Optimum, a high efficiency and provision percentage resulted. (3) Communication always led to gains in efficiency. A weak long-term effect was found in the Simple VCM case and a strong long-term effect was found in the Provision Point VCM case. (4) The efficiency in the complete and incomplete information cases for both Simple and Provision Point VCMs were very similar. This is a surprising result. In MCMs, the government stipulates a payment rule by legislation and all industry members must comply. Firms can reduce their share of the advertising budget only by under-stating privately held information, leading to sub-optimal advertising. We design a mechanism that overcomes this by ensuring that truthful information revelation is the dominant strategy for all firms.
Type:
text; Dissertation-Reproduction (electronic)
Keywords:
Business Administration, Marketing.; Economics, General.; Economics, Commerce-Business.
Degree Name:
Ph.D.
Degree Level:
doctoral
Degree Program:
Graduate College; Industrial Management
Degree Grantor:
University of Arizona
Advisor:
Isaac, R. Mark

Full metadata record

DC FieldValue Language
dc.language.isoen_USen_US
dc.titleAn analytical and experimental investigation of issues in the organization of generic advertising campaignsen_US
dc.creatorKrishnamurthy, Sandeep, 1967-en_US
dc.contributor.authorKrishnamurthy, Sandeep, 1967-en_US
dc.date.issued1996en_US
dc.publisherThe University of Arizona.en_US
dc.rightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.en_US
dc.description.abstractGeneric advertising campaigns promote the general qualities of a product to customers thus improving the demand of all firms who market that product. Recent national campaigns of this nature include the milk advertising campaign "Got Milk?" and the advertising campaign by florists "Think Flowers." The focus of this dissertation is to study, through analytical modeling and an experimental economics perspective, the strategic issues that arise in the organization of such an advertising campaign. We investigate two mechanisms used in practice--Voluntary Contribution Mechanisms (VCMs) and Mandated Contribution Mechanisms (MCMs). In the former, industry members can decide if they want to participate and if so, how much they wish to contribute. Here, the strategic problem relates to achieving complete participation. Specifically, either "free-rider" or "cheap-rider" equilibria obtain, leading to sub-optimal advertising. In order to overcome this, we propose the Provision Point VCM where the campaign is conducted only if contributions exceed a pre-determined threshold. Here, optimal advertising is always a feasible equilibrium. We experimentally investigated the impact of these two VCMs, face-to-face communication and completeness of information on contributions. Managers with experience in such advertising also participated in our study. The findings from the forty four economic experiments were: (1) Simple VCM led to lower efficiency in comparison to Provision Point VCMs. (2) When the provision point was set at the Pareto Optimum, a high efficiency and provision percentage resulted. (3) Communication always led to gains in efficiency. A weak long-term effect was found in the Simple VCM case and a strong long-term effect was found in the Provision Point VCM case. (4) The efficiency in the complete and incomplete information cases for both Simple and Provision Point VCMs were very similar. This is a surprising result. In MCMs, the government stipulates a payment rule by legislation and all industry members must comply. Firms can reduce their share of the advertising budget only by under-stating privately held information, leading to sub-optimal advertising. We design a mechanism that overcomes this by ensuring that truthful information revelation is the dominant strategy for all firms.en_US
dc.typetexten_US
dc.typeDissertation-Reproduction (electronic)en_US
dc.subjectBusiness Administration, Marketing.en_US
dc.subjectEconomics, General.en_US
dc.subjectEconomics, Commerce-Business.en_US
thesis.degree.namePh.D.en_US
thesis.degree.leveldoctoralen_US
thesis.degree.disciplineGraduate Collegeen_US
thesis.degree.disciplineIndustrial Managementen_US
thesis.degree.grantorUniversity of Arizonaen_US
dc.contributor.advisorIsaac, R. Marken_US
dc.identifier.proquest9720702en_US
dc.identifier.bibrecord.b3461137xen_US
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