Demand and Supply Determinants of Advertising Intensity among Convenience Goods

During the past fifteen years, considerable attention has been given by economists to advertising. Porter [9] and Nelson [6] recognized that the use of advertising by producers and its effect on consumers will differ depending upon the type of good being marketed. This reasoning led to empirical work based upon categories of convenience vs. nonconvenience (experience vs. search) goods. What is not explained in their models, however, is why there was substantial variation in advertising effort within the category of goods called convenience (experience) goods.1 Previous efforts have been made to incorporate the role of advertising into the consumer choice problem within an environment characterized by imperfect information. Nelson focuses attention on how the nature of the product affects the consumer's choice of the method of gathering information on brands of a product. Specifically, Nelson categorizes products as either search goods or experience goods. The former category includes those products the attributes of which can be discovered by inspection prior to purchase. The latter category includes those products the attributes of which can be ascertained only by direct comparison.