DP4817 Advertising and Pricing at Multiple-Output Firms: Evidence from US Thrift Institutions

Author(s): Robert DeYoung, Evren Örs
Publication Date: December 2004
Keyword(s): advertising, depository institutions, structure-performance
JEL(s): G21, L10
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4817

We derive five hypotheses regarding market competition, price, and advertising from a theoretical model of a profit maximizing depository institution, and test these conjectures in a simultaneous system of deposit interest rates and advertising expenditures for a data panel of 1,867 thrift institutions that offer 13 different deposit products in 666 local markets in the US between 1994 and 2000. We find some support for each of our hypotheses ? branding, information, Dorfman-Steiner, structure-advertising, and structure-price ? with the strength of the results often depending on the attributes of the deposit products or the characteristics of the thrifts.