With the increase in price competition in many markets, an understanding of the dynamic effects of advertising on price sensitivity has gained added importance. Unfortunately, however, empirical as well as theoretical work in this area has not been able to provide conclusive findings regarding these effects. Whereas some researchers report a reduction in price sensitivity with increased advertising, others conclude the opposite. One explanation for these contradictions is that the results in previous studies were biased by consumer heterogeneity, which was not controlled for in the analyses. In this study, we propose a choice model and estimation procedure to investigate the dynamic effects of advertising exposure on price sensitivity at the individual level while controlling for heterogeneity. The key feature of our model is that household heterogeneity is incorporated through the use of a random effects formulation for the price sensitivity parameter. Furthermore, the parameter is assumed to be a function of the cumulative advertising exposures of each household thereby accounting for heterogeneity in exposures as well. The assumptions that we make regarding the distribution of the random error in utilities result in a heteroskedastic covariance probit specification of the model. We calibrate this model on the A. C. Nielsen scanner database for the liquid detergent and yogurt product categories. Estimates of the parameters indicate that advertising reduces price sensitivity. However, brands differ in how much they gain from increased advertising. Specifically, brands with lower average price sensitivity are found to exhibit stronger reductions with advertising. Whereas our results support the market power hypothesis, additional research is necessary to generalize these findings. For instance, an investigation of markets with different tiers of brands may reveal some asymmetries in the effects of advertising. These and other avenues for future research are also discussed.