Push‐me pull‐you: comparative advertising in the OTC analgesics industry

We derive equilibrium incentives to use comparative advertising that pushes up own brand perception and pulls down the brand image of targeted rivals. Data on content and spending for all TV advertisements in Over‐The‐ Counter (OTC) analgesics enable us to construct matrices of rival targeting expenditures and estimate the structural model. Using brands' optimal choices, these attack matrices identify diversion ratios, from which we derive comparative advertising damage measures. We find that comparative advertising causes more damage to the targeted rival than benefit to the advertiser. We simulate banning comparative advertising to find industry profits rise.     

Socially responsible products: what motivates consumers to pay a premium?

The motivation to pay a premium for socially responsible products is partly an expression of consumer concern for the well-being of those involved in the production process. Buying a product with a socially responsible label, and donating to a charity are similarly motivated actions. While there is an extensive literature on the economics of charitable giving that examines motivations to donate as well as on the impacts of labelling on consumer demand, there is little overlap between the two literatures. We bridge these two literatures by investigating whether consumers have heterogeneous motivations for paying a premium. Through a laboratory experiment that auctions coffee with hypothetical socially responsible labels that put different weights on in-kind versus cash transfers, we find that those consumers who prefer an in-kind transfer (paternalistic altruists) are willing to pay a 52.5% price premium over standard coffee. Those who prefer that most of the premium is paid as cash (strong altruists) are willing to pay a 42.5% premium. Finally, those who are indifferent to how the premium is spent by the recipient (warm-glow givers) are willing to pay only a 19.2% premium. We discuss the implications of our results and future research directions.     

Economic and health effects of fruit and vegetable advertising: Evidence from lab experiments

This study investigates consumer response to various types of advertising for fruits and vegetables—a food category which health officials uniformly agree is significantly under-consumed in the United States. Using an adult, non-student subject pool of 271 participants in an economic experiment, consumers’ response to different types of fruit and vegetable advertising is measured empirically. This study finds that broad-based advertising, which is generic advertising for the entire fruit and vegetable category, increases consumer willingness to pay by an average of 24.6%. The simulation model shows that broad-based advertising for fruits and vegetables, either alone or as a hybrid with individual commodity-specific campaigns (e.g., apple advertising), would reduce average caloric intake per person by approximately 1800 kcal per year. The results of this study may contribute to new public policy initiatives that aim to reduce diet-related illnesses and obesity, which have become increasingly prevalent in the United States.