Does Advertising Stimulate Sales or Mainly Deliver Signals? A Multivariate Analysis

S. Abosedra, M. Zhong, A. Darrat and M. Hsu

The main purpose of this article is to empirically examine the Galbraithian hypothesis that advertising adjusts aggregate demand to the changing industrial development and consequently stimulates sales.

Does Advertising Stimulate Sales or Mainly Deliver Signals? 

A Multivariate Analysis

Maxwell K. Hsu University of WisconsinMi F. DarratLouisiana Tech UniversityMaosen ZhongKansas State University andSalah S. Abosedra University of Qatar

INTRODUCTION

Advertising expenditures in the USA have dramatically increased from about $31 billion in 1950 (or less than 2% of the nation's Gross Domestic Product) to more than $168 billion in 1999 (approximately 2.5% of the GDP).1While several factors may account for such a phenomenal growth in advertising, a major culprit is likely to be the common belief; espoused by...

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