Book Description

The first chapter studies the impact of private labels on advertising incentives of national brands. The worldwide expansion of private labels over the past two decades not only transformed the choice sets of consumers, but also forced manufacturers of national brands to design new marketing strategies to maintain their market positions. I first develop a consumer demand model that incorporates spillover effects of advertising for antacids including private labels and find positive spillovers of national brands' advertising on demand for private label antacids. With the demand estimates, I simulate the equilibrium prices and advertising levels for leading national brands in a counterfactual where private labels are eliminated to quantify national brands' advertising incentives as a response to the rise of private labels. I find that national brands' marginal returns to advertising would increase by, on average, 43% if all private labels are eliminated from the market, and the marginal returns for one national brand would increase by 31-37% when only its own private label counterpart is removed. The second chapter proposes a modeling framework for measuring the value of targeted advertising and apply that framework to detailed data on television advertising. Brands can concentrate their advertising in a particular demographic group only insofar as they can find television programs whose viewers are predominantly in that group. We measure the degree to which this is possible with the current menu of programs, and then analyze the advertising profiles (i.e. the demographic composition of the purchased advertising impressions) of over 13,000 brands to estimate their demographic group-specific returns to advertising. With these estimates we can simulate how changes in the ability to target affect brands' overall returns to advertising.