Advertising, Consumer Awareness, and Choice: Evidence from the U.S. Banking Industry∗

How does advertising influence consumer decisions and market outcomes? We utilize a detailed data set on consumer shopping behavior and choices over retail bank accounts to investigate the effects of advertising on the different stages of the shopping process: awareness, consideration, and choice. We formulate a structural model in which advertising is allowed to affect each of the separate stages of decision-making. The model endogenizes consumers ’ choices of consideration sets by positing that consumers undertake costly search. Our results indicate that advertising in the U.S. banking market is primarily a shifter of awareness as opposed to consideration or choice. Advertising makes consumers aware of more options; thus consumers search more and find better alternatives than they would otherwise. In turn, this increases the market share o