Doctoral Dissertation Research in Economics: Limited Consideration and Positive Spillovers in Advertising

University Of Maryland, College Park, College Park MD

Investigators

Abstract

Recent studies have identified positive spillovers in advertising; a process where advertising for one product increases consumption of another product. The proposed research project will use laboratory experiments to study a new model of advertising with positive spillovers that is designed to understand whether such spillovers are beneficial. This model improves on existing work by bridging the gap between three separate and different bodies of literature in the economics of advertising, the effects of limited attention, and of network analysis. The aim of the experiments is to better understand: (1) conditions that make advertising socially wasteful or useful and (2) whether a well-informed policy maker can reduce socially wasteful advertising or take advantage of socially beneficial advertising. The research results will provide a guide to US businesses on how best to invest their advertising resources. The results will also provide important inputs into the promotion of different government policies that may be related to each other. This award will fund a graduate dissertation research, hence contribute to the development of US research capital and global leadership in economics research. This project consists of experiments designed to test the validity and empirical implications of a novel model of advertising. The proposed experiments will be conducted in two stages: An Online Survey which will be used to elicit a perceived product network on a set of charitable organizations and a laboratory experiment in which the effects of advertising will be measured through incentivized choice in response to experimentally varied advertising stimuli. These projects will be completed sequentially, with the results of the online survey informing the parameterization of the laboratory experimental treatments. The study will answer two questions: (i) to what extent can the model of advertising with product networks explain responses to advertising campaigns by charitable organizations? (ii) how can charitable organizations, facing similar product networks, optimally plan advertising campaigns in the presence of spillovers? The results of the research project can help charitable organizations, businesses, and governments plan and execute efficient advertising campaigns in the presence of network effects. These successful advertising campaigns will lead to better business performance, hence increase economic growth in the US. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.