Measuring the Benefits to Advertising under Monopolistic Competition
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This paper determines the benefits and costs of firm-level advertising in a monopolistically
competitive industry. The model is useful in an environment in which firm-level costs may be
absent or imprecise. The empirical example uses data on the advertising for a new line of prune
snacks by Sunsweet Growers between 2008 and 2010, revealing average benefit-cost estimates
from $1.26 to $4.35 for every dollar allocated to the new product line.