Advertising, consumer awareness, and choice: evidence from the U.S. banking industry

Elisabeth Honka, Ali Hortaçsu, Maria Ana Vitorino

Research output: Contribution to journalArticle

  • 1 Citations

Abstract

How does advertising influence consumer decisions and market outcomes? We utilize detailed data on consumer shopping behavior and choices over bank accounts to investigate the effects of advertising on the different stages of the shopping process: awareness, consideration, and choice. We formulate a structural model with costly search and endogenous consideration sets, and show that advertising in the U.S. banking industry is primarily a shifter of awareness as opposed to consideration or choice. Advertising makes consumers aware of more options, search more, and find better alternatives. This increases the market share of smaller banks and makes the industry more competitive.

Original languageEnglish (US)
Pages (from-to)611-646
Number of pages36
JournalRAND Journal of Economics
Volume48
Issue number3
DOIs
StatePublished - Sep 1 2017

Fingerprint

Consumer choice
Industry
Shopping
Structural model

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Advertising, consumer awareness, and choice : evidence from the U.S. banking industry. / Honka, Elisabeth; Hortaçsu, Ali; Vitorino, Maria Ana.

In: RAND Journal of Economics, Vol. 48, No. 3, 01.09.2017, p. 611-646.

Research output: Contribution to journalArticle

Honka, Elisabeth; Hortaçsu, Ali; Vitorino, Maria Ana / Advertising, consumer awareness, and choice : evidence from the U.S. banking industry.

In: RAND Journal of Economics, Vol. 48, No. 3, 01.09.2017, p. 611-646.

Research output: Contribution to journalArticle

@article{de4c913c02d649bf9ae1515165b79db9,
title = "Advertising, consumer awareness, and choice: evidence from the U.S. banking industry",
abstract = "How does advertising influence consumer decisions and market outcomes? We utilize detailed data on consumer shopping behavior and choices over bank accounts to investigate the effects of advertising on the different stages of the shopping process: awareness, consideration, and choice. We formulate a structural model with costly search and endogenous consideration sets, and show that advertising in the U.S. banking industry is primarily a shifter of awareness as opposed to consideration or choice. Advertising makes consumers aware of more options, search more, and find better alternatives. This increases the market share of smaller banks and makes the industry more competitive.",
author = "Elisabeth Honka and Ali Hortaçsu and Vitorino, {Maria Ana}",
year = "2017",
month = "9",
doi = "10.1111/1756-2171.12188",
volume = "48",
pages = "611--646",
journal = "RAND Journal of Economics",
issn = "0741-6261",
publisher = "Rand Journal of Economics",
number = "3",

}

TY - JOUR

T1 - Advertising, consumer awareness, and choice

T2 - RAND Journal of Economics

AU - Honka,Elisabeth

AU - Hortaçsu,Ali

AU - Vitorino,Maria Ana

PY - 2017/9/1

Y1 - 2017/9/1

N2 - How does advertising influence consumer decisions and market outcomes? We utilize detailed data on consumer shopping behavior and choices over bank accounts to investigate the effects of advertising on the different stages of the shopping process: awareness, consideration, and choice. We formulate a structural model with costly search and endogenous consideration sets, and show that advertising in the U.S. banking industry is primarily a shifter of awareness as opposed to consideration or choice. Advertising makes consumers aware of more options, search more, and find better alternatives. This increases the market share of smaller banks and makes the industry more competitive.

AB - How does advertising influence consumer decisions and market outcomes? We utilize detailed data on consumer shopping behavior and choices over bank accounts to investigate the effects of advertising on the different stages of the shopping process: awareness, consideration, and choice. We formulate a structural model with costly search and endogenous consideration sets, and show that advertising in the U.S. banking industry is primarily a shifter of awareness as opposed to consideration or choice. Advertising makes consumers aware of more options, search more, and find better alternatives. This increases the market share of smaller banks and makes the industry more competitive.

UR - http://www.scopus.com/inward/record.url?scp=85027699758&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85027699758&partnerID=8YFLogxK

U2 - 10.1111/1756-2171.12188

DO - 10.1111/1756-2171.12188

M3 - Article

VL - 48

SP - 611

EP - 646

JO - RAND Journal of Economics

JF - RAND Journal of Economics

SN - 0741-6261

IS - 3

ER -