Branding and Product Differentiation in Markets with Advertising

Project Outcomes Statement

This award funded research in empirical microeconomics. The project made two major contributions.

First, it evaluated the extent to which the large price premium attached to national brands in consumer packaged goods markets reflects a lack of information or sophistication on the part of consumers. By bringing together comprehensive data on consumer purchases with novel survey and demographic data, the researchers were able to estimate how the market shares and prices of goods sold would change if all consumers were fully informed about the relative merits of the goods on the grocery store shelf. Using this information they were able to inform important policy questions in consumer protection, product regulation, and competition policy. The novel methodologies they developed are useful beyond the products studied in this research, and the results will inform broader debates about the effect of consumer information on market competition.

Second, it developed and applied a framework for studying the effect of advertising competition and audience preferences on the ideological positioning of online news outlets. As news media move to new online platforms, important questions have emerged about whether advertising-funded online media will supply informative news from a diverse range of viewpoints. The research informs these important questions with both economic theory and evidence and is relevant to emerging policy debates about the regulation and financing of online journalism.