estimating advertising effects on sales in a competitive setting

Boonghee Yoo
Hofstra University
Rujirutana Mandhachitara
Long Island University

The longitudinal analysis of the relationship between advertising spending and sales generated has a distinguished history facilitated in large part by a court case that brought the Lydia Pinkham Company's annual medicine advertising-sales data for the years 1907-1960 into the public domain. Much valuable work on the advertising-sales relationship on the Pinkham data was done by Palda (1964) who demonstrated for the first time the dynamic effect of advertising on sales through a Koyck (1954) distributed lag model. Since Palda's (1964) study, researchers have showed a tremendous amount of interest in the long-term, or carryover or lagged, effects of advertising using the Koyck model (Aaker, Carman, and Jacobson, 1982; Bass and Leone, 1983; Clarke, 1976; Dhalla, 1978; Jedidi, Mela, and Gupta, 1999; Leeflang and Reuijl, 1985; McCann, Morey, and Raturi, 1991; Mela, Gupta, and Lehmann, 1997; Rao, 1986; Srinivasan and Weir, 1988).