Can advertising by dominant firms pose a predatory threat? Theoretically, the answer clearly is yes. However, empirical evidence indicating the importance of this theoretical finding is largely missing. Economists' empirical studies of advertising, which typically focus on the question of whether high levels of advertising are indicative of the presence of a barrier to entry or signal that advertising information can substitute for consumption experience, usually employ average advertising levels that hide strategically focused price cuts or changes in short-term advertising rates.

This paper explores the relationship between a differentiated brand's market share and its price in the context of a model that recognizes the endogeneity of the brand's advertising behavior and pricing decisions. The empirical analysis suggests that General Foods charged higher prices for its regular-grind Maxwell House coffee in geographic areas where the brand's market share was relatively large. Available cross-sectional, time-series data and company documents suggest that this empirical relationship is attributable to the preference grocery retailers have for putting dominant coffee brands on special, rather than cross-sectional variations in costs, market concentration, or consumer tastes.