The effects of awarness of social dilemmas on advertising budget setting: A scenario study

In this study, which examines the dynamics involved in setting advertising budgets, the social dilemma theory was applied in an attempt to understand the interdependency problems of advertisers in their investment decisions. In an experiment, a budget decision was made for a company after a period in which the company's market shares had either increased, decreased, or remained stable. Subjects were pre-screened with regard to their social value orientation (cooperative vs competitive). Half of the subjects were informed of the threat of social dilemmas and of the possible negative consequences; the other half were not informed. Budget decisions can be predicted on the basis of subjects' social value orientations and the awareness of the threat of social dilemmas. Subjects with a relatively strong competitive orientation are more zealous in setting their budgets. However, the awareness variable shows the strongest effects, especially in conditions when subjects experience a declining market share. It was concluded that knowledge about the dynamics of social dilemmas may prevent advertisers from a competitive reaction to the loss of share and may thus prevent them from becoming trapped in a competitive (social) dilemma.