Description: Job Market Practice Talk Sriparna Goswami (Iowa State University)

Location: 368A Heady Hall

Title: Advertising Spillovers and Consumer Awareness in the Craft Beer Market

Abstract: This paper studies the spillovers generated from rival advertising amidst rising consumer awareness in the U.S. craft beer market. By leveraging the discontinuity in advertising across market borders, we estimate that advertising spillovers are more pronounced in cities hosting a larger number of craft breweries, as the increase in advertising spending in response to rivals' advertising is smaller in these markets. We find the elasticity estimates to be smaller for increased consumer awareness, represented by the time periods after 2017, a year of extensive industry campaigns by the Brewers Association. To delve deeper into the advertising mechanics at play in this industry, we develop a limited information discrete choice model of consumer demand, incorporating both persuasive and informative advertising approaches, and analyze the competitive landscape of the craft beer market. Our numerical simulations reveal that higher consumer awareness levels are associated with lower advertising elasticities, leading to decreased advertising spending when the return on consumer awareness is positive for firms.