Review of Industrial Organization 20: 323–348, 2002.
© 2002 Kluwer Academic Publishers. Printed in the Netherlands.
Intermedia Substitutability and Market Demand by
ALVIN J. SILK
Lincoln Filene Professor of Business Administration Emeritus, Graduate School of Business
Administration, Harvard University, Soldiers Field, Boston, MA 02163, U.S.A.
LISA R. KLEIN
Assistant Professor of Marketing, Jones Graduate School of Management, Rice University,
Houston, TX 77005-1892, U.S.A.
ERNST R. BERNDT
Louis B. Seley Professor of Applied Economics, Sloan School of Management, Massachusetts
Institute of Technology, 50 Memorial Drive, Cambridge, MA 02142-1347, U.S.A.
Abstract. We assess substitute and complementary relationships among eight national advertising
media classes, as well as the magnitude of their own-price elasticities. We employ a translog de-
mand model, whose parameters we estimate by three-stage least squares, based on 1960–94 annual
U.S. data. We ﬁnd aggregate demand by national advertisers for each of the eight media is own-
price inelastic, and that cross-price elasticities suggest slightly more substitute than complementary
relationships, although both are rather weak. These patterns are consistent with long prevailing
institutional arrangements and media selection practices.
Key words: Intermedia substitutability, national advertising.
JEL Classiﬁcations: L82, L84, M37.
The U.S. advertising market can be decomposed into two segments, based on
the geographical scope of advertisers’ operations. National advertisers, consisting
of ﬁrms that market on a national or broad regional basis constitute the largest
segment, accounting for about 58% of total U.S. advertising expenditures in the
We are indebted to Sam Chun, Tom Eisenmann, Rajiv Lal, David Montgomery, John Quelch,
two anonymous referees and the editor for constructive comments. We thank Robert Coen for sup-
plying data. Research support from the Division of Research, Harvard Business School and the MIT
Sloan School of Management is gratefully acknowledged.