A theoretical model of generic and brand advertising

A theoretical model of generic and brand advertising has been developed in this study. The consumer, the recipient of advertising, maximizes utility from a commodity characteristic using the household production function approach. A commodity characteristic is produced by several inputs, including market products and generic and brand advertising. This approach provides an insight into how the consumer evaluates the informative and/or persuasive value of advertising. The advertising value reflects the different levels of product attributes, such as homogeneity, identifiability, nutritive characteristics, number of uses, presented on any market good. The level of the above product attributes is the differentiating factor between generic and brand advertising.;The producer, the supplier of advertising, enters the model as a profit maximizer who uses advertising up to the point where the marginal revenue product due to promotional efforts equals the marginal cost of the advertisements. At the same time, market structural factors also affect the change in product price due to the use of advertising and are accounted for by the price elasticities of supply and demand.;The final form of the advertising model presented in this study has two equations in terms of advertising parameters and levels of generic and brand advertising expenditures. by varying the levels of the advertising parameters, this model was used to simulate and evaluate the effects of product attributes and structural factors on the levels of generic and brand advertising.;A general simulation of the advertising model shows that the level of a type of advertising with more favorable product attributes should have a larger share of the advertising market; the price elasticity of supply is directly related to the level of advertising; the price elasticity of demand is inversely related to the advertising level; the product price is directly related to advertising levels; and the knowledge of the product is inversely related to the levels of advertising. Further hypothetical simulation of the advertising model using beef, milk and potatoes confirmed the results obtained in the general simulation.