A model of advertising format competition: on the use of celebrities in ads |
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Authors: | C Robert Clark Ignatius J Horstmann |
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Institution: | 1. HEC Montréal;2. Rotman School of Management, University of Toronto |
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Abstract: | We develop a model that endogenizes both advertising format – ads with or without celebrity endorsements – and the endorsement fee. Marketing studies suggest that celebrities enhance brand recall and perception of product value. In our model, ads featuring celebrities occur when the product market is large – endorsements are likely for products sold nationally – and when products are sufficiently similar that the persuasive character of advertising looms large in demand – running shoes, beauty products, soft drinks, for example. Celebrity endorsement fees are increasing in market size and in the degree of similarity of the products being advertised. |
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