Generic Advertising and Product Differentiation

Abstract

Abstract This article considers whether generic advertising lowers the differentiation among competing brands of the same good. Analytical results show that if the benefits from generic advertising from increased demand are outweighed by the costs from lower product differentiation then high‐quality producers will not benefit from generic promotion. Hypotheses are tested empirically under a conditional‐logit approach using retail‐market sales and advertising data for the U.S. prune industry. Results from this study provide evidence that generic advertising has a slight differential effect on the perceived qualities of different brands.