Question: Firms are interested in finding out the effectiveness of advertising on firms’ sales. Suppose that you are hired as a consultant. Suppose that firms consider two types of advertising: TV and print media. To finish the project, you plan to collect a sample of representative firms.

 

(a)    List variables that you need for the project. Discuss how each variable affects firm’s choice of advertising and/or sales.

(b)    Propose a model that links the variables in part (a) to firm’s choice and sales. Discuss model estimation and possible hypothesis testing. Be specific.

(c)    How would you evaluate the relative effectiveness of the two advertising media?