On informative advertising and product differentiation
- 作者：C. Christou ; N. Vettas
- 关键词：Informative advertising ; Product differentiation ; Non-localized competition ; Random utility
- 刊名：International Journal of Industrial Organization
- 出版年：2008
- 期刊代码：22_01677187
- 类别：eco
- 出版时间：January 2008
- 卷：26
- 期：1
- 页码：92-112
- 文件大小：437 K
摘要
We study informative advertising within a random utility, non-localized competition model of product differentiation. Quasi-concavity of profits may fail, as each firm may prefer to deviate to a high price, targeting consumers who only become informed about its own product. When a symmetric equilibrium exists, it is unique. Increasing the number of firms may increase or decrease the equilibrium price. Advertising tends to be suboptimal when product differentiation is low and excessive otherwise. We also revisit Grossman and Shapiro [Grossman, G., Shapiro, S., 1984. Informative advertising with differentiated products. Review of Economic Studies 51, 63–81], focusing on similarities in constructing a symmetric equilibrium in the two models, but also illustrating differences in their welfare properties.