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The author uses a panel data set that combines annual brand-level advertising expenditures for over three hundred brands with measures of brand awareness and perceived quality from a large-scale consumer survey to study the effect of advertising. Advertising is modeled as a dynamic investment in a brand's stocks of awareness and perceived quality. Panel data allow us to control for unobserved heterogeneity across brands and to identify the effect of advertising from the time-series variation within brands. Author finds that advertising has consistently a significant positive effect on brand awareness but no significant effect on perceived quality.
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