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

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    Author
    Krishnamurthy, Sandeep, 1967-
    Issue Date
    1996
    Keywords
    Business Administration, Marketing.
    Economics, General.
    Economics, Commerce-Business.
    Advisor
    Isaac, R. Mark
    
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    Show full item record
    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)
    Degree Name
    Ph.D.
    Degree Level
    doctoral
    Degree Program
    Graduate College
    Industrial Management
    Degree Grantor
    University of Arizona
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