Ad expenditures and perceived quality: a replication and extension

Several studies have explored the impact of advertising on perceived quality of brands. These include analytical ones Milgrom and Roberts ( Journal of Political Economy, 94 (4)796-821, 1986 ) and econometric studies (e.g., Tsai and Honka Marketing Science, 40 (6)1030-1058, 2021 ). We replicate and extend the findings of Tsai and Honka ( Marketing Science, 40 (6)1030-1058, 2021 ) and Du et al. ( Quantitative Marketing and Economics, 17 (3)257-323, 2019 ), using a multi-firm, multi-year data set and focus on the impact of ad informativeness (measured as share of money spent on informative ads) on the link between ad expenditures and perceived brand quality. We find that the effect of ad expenditures on perceived quality is weaker for brands with more informative ads.