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Does Advertising Indicate Product Quality? Evidence From Prelaunch And Postlaunch Advertising In The Movie Industry, Reo Song, Sungha Jang, Gangshu (George) Cai

Information Systems and Analytics

Literature on the informative role of advertising indicates that advertising quantity can serve as an indicator of product quality. As product life cycles grow shorter, firms in many industries spend significant amounts on advertising during the prelaunch period to create large initial demand. Thus, the role of prelaunch advertising may differ from that of postlaunch advertising, and a proper understanding of these differences is important. This study provides an empirical investigation of whether advertising is a reliable indicator of quality before and after product launches, using the data from the movie industry. Analyses of 1078 movies released during 2003–2011 show …