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Figure Figure 1 Growth that compounds

The same asset, left alone, at three published rates

Ten years after the maintaining spend stops, the same starting asset is at 78%, 11% or effectively nothing, depending only on which published rate you take. This is the spread a budget is asked to absorb.

One asset decaying at three published rates over ten years A line chart. The horizontal axis runs from zero to ten years since the maintaining spend stopped; the vertical axis is the share of the asset still standing, from zero to 100 per cent. Three curves start together at 100. At 2.5 per cent a year the curve is almost flat and ends at 78. At 20 per cent a year it passes half after 3.1 years and ends at 11. At 55 per cent a year it passes half after 10 months and is effectively at zero within four years. 0204060801000246810 Share of the asset still standing (%) Years since the maintaining spend stopped 78 11 0 10 months 3.1 years Organisational capital, 20%/yr: assumed, never estimatedAdvertising capital, 55%/yrConsumption experience in preference, 2.5%/yr
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Reference & Evidence

Source: Curves computed as (1 − d) raised to the power t, from the rates in Table 1: 2.5% a year (Bronnenberg, Dubé & Gentzkow 2012), 20% (the assumed organisational-capital rate, Ewens, Peters & Wang 2019, revised October 2023), 55% (Corrado et al. 2016 via Bronnenberg, Dubé & Syverson 2022). A disclosed model, not measured data.

Each line is a claim from the register this journal publishes against, resolved from the register at build time.

  • A The 2.5% rate measures decay of one year's consumption experiences in brand preference, not advertising capital Bronnenberg, Dube & Gentzkow (2012), p. 2474 · BDG12-C1
  • A The organisational-capital depreciation rate is assumed rather than estimated, which is why the paper's own contrast is with the estimated R&D rate: "The results of our parameter estimation imply an average 33% annual depreciation rate for R&D versus 23% for BEA R&D depreciation rates where industry coverage is available" Ewens, Peters & Wang (2019, revised 2023), note to Table 1 · EPW24-C1
  • A They adopt a 55% annual advertising-capital depreciation rate from Corrado et al. (2016) Bronnenberg, Dube & Syverson (2022), section II · BDS22-C2

Grades: A, verified against the printed page of the primary source · B, primary source, text layer only · C, authoritative secondary · D, reported.

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