Generalizable and Robust TV Advertising Effects: Substantially smaller advertising elasticities compared to the results documented in the literature

Shapiro, Bradley and Hitsch, Guenter J. and Tuchman, Anna, Generalizable and Robust TV Advertising Effects (September 17, 2019). SSRN: http://dx.doi.org/10.2139/ssrn.3273476

Abstract: We provide generalizable and robust results on the causal sales effect of TV advertising for a large number of products in many categories. Such generalizable results provide a prior distribution that can improve the advertising decisions made by firms and the analysis and recommendations of policy makers. A single case study cannot provide generalizable results, and hence the literature provides several meta-analyses based on published case studies of advertising effects. However, publication bias results if the research or review process systematically rejects estimates of small, statistically insignificant, or “unexpected” advertising elasticities. Consequently, if there is publication bias, the results of a meta-analysis will not reflect the true population distribution of advertising effects. To provide generalizable results, we base our analysis on a large number of products and clearly lay out the research protocol used to select the products. We characterize the distribution of all estimates, irrespective of sign, size, or statistical significance. To ensure generalizability, we document the robustness of the estimates. First, we examine the sensitivity of the results to the assumptions made when constructing the data used in estimation. Second, we document whether the estimated effects are sensitive to the identification strategies that we use to claim causality based on observational data. Our results reveal substantially smaller advertising elasticities compared to the results documented in the extant literature, as well as a sizable percentage of statistically insignificant or negative estimates. If we only select products with statistically significant and positive estimates, the mean and median of the advertising effect distribution increase by a factor of about five. The results are robust to various identifying assumptions, and are consistent with both publication bias and bias due to non-robust identification strategies to obtain causal estimates in the literature.

Keywords: Advertising, Publication Bias, Generalizability
JEL Classification: L00, L15, L81, M31, M37, B41, C55, C52, C81, C18