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dc.contributor.authorGoeree, Michelle S.en_US
dc.date.accessioned2009-01-29T16:04:42Z-
dc.date.available2009-01-29T16:04:42Z-
dc.date.issued2004en_US
dc.identifier.urihttp://hdl.handle.net/10419/23396-
dc.description.abstractTraditional models of consumer choice assume consumers are aware of all products for sale. This assumption is questionable, especially when applied to markets characterized by a high degree of change, such as the personal computer (PC) industry. I present an empirical discrete-choice model of limited information on the part of consumers, where advertising influences the set of products from which consumers choose to purchase. Multi-product firms choose prices and advertising in each medium to maximize their profits. I apply the model to the US PC market, in which advertising expenditures are over $2 billion annually. The estimation technique incorporates macro and micro data from three sources. Estimated median industry markups are 19% over production costs. The high industry markups are explained in part by the fact that consumers know only some of the products for sale. Indeed estimates from traditional consumer choice models predict median markups of onefourth this magnitude. I find that product-specific demand curves are biased towards being too elastic under traditional models of consumer choice. The estimates suggest that PC firms use advertising media to target high-income households, that there are returns to scope in group advertising, and that word-of-mouth or experience plays a role in informing consumers. The top firms engage in higher than average advertising and earn higher than average markups.en_US
dc.language.isoengen_US
dc.publisheren_US
dc.relation.ispartofseriesWorking paper series / Claremont McKenna College 04,09en_US
dc.subject.jelL15en_US
dc.subject.jelL63en_US
dc.subject.jelM37en_US
dc.subject.jelD21en_US
dc.subject.jelD12en_US
dc.subject.ddc330en_US
dc.subject.keywordAdvertisingen_US
dc.subject.keywordinformationen_US
dc.subject.keyworddiscrete choice modelsen_US
dc.subject.keywordproduct differentiationen_US
dc.subject.keywordpersonal computer industryen_US
dc.subject.stwPC-Industrieen_US
dc.subject.stwWerbungen_US
dc.subject.stwPreiselastizitäten_US
dc.subject.stwKonsumentenverhaltenen_US
dc.subject.stwProduktdifferenzierungen_US
dc.subject.stwDiskrete Entscheidungen_US
dc.subject.stwVereinigte Staatenen_US
dc.titleAdvertising in the U.S. Personal Computer Industryen_US
dc.typeWorking Paperen_US
dc.identifier.ppn47932882Xen_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:Claremont Colleges Working Papers in Economics, Department of Economics, Claremont McKenna College

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