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Advertising in Competitive Markets

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Author Info
Stegeman, Mark
Abstract

In this paper, small firms sell a homogeneous good to small consumers under conditions of free entry, but consumers receive price information only through firms' advertising. In equilibrium, every firm on the continuous price distribution buys less advertising than is socially optimal. The result is robust if firms advertise in just one medium. If readers of different advertising media are positively correlated, excess advertising can occur in media used exclusively to advertise discount prices. Copyright 1991 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 81 (1991)
Issue (Month): 1 (March)
Pages: 210-23
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Handle: RePEc:aea:aecrev:v:81:y:1991:i:1:p:210-23

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  1. Pastine, Ivan & Pastine, Tuvana, 2001. "Consumption Externalities, Coordination and Advertising," CEPR Discussion Papers 2867, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Anderson, Simon P & Renault, Régis, 2005. "Advertising Content," CEPR Discussion Papers 5064, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Ian McCarthy, 2008. "Advertising Intensity and Welfare in an Equilibrium Search Model," Caepr Working Papers 2008-003, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington. [Downloadable!]
  4. Michael R. Baye & John Morgan, 2005. "Brand and Price Advertising in Online Markets," Working Papers 2005-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
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  5. P. Cavelaars, 2001. "International Trade Costs, Home Bias and Europe's Single Markets," MEB Series (discontinued) 2001-8, Netherlands Central Bank, Monetary and Economic Policy Department.
  6. Michael R. Baye & John Morgan, 2005. "Probabilistic Patents," Microeconomics 0504004, EconWPA. [Downloadable!]
  7. Anderson, Simon P & de Palma, André, 2009. "Competition for attention in the information (overload) age," CEPR Discussion Papers 7286, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  8. Van Zandt, Timothy, 2001. "Information Overload in a Network of Targeted Communication," CEPR Discussion Papers 2836, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Genesove, David & Simhon, Avi, 2008. "Seasonality and the Effect of Advertising on Price," CEPR Discussion Papers 6999, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  10. Rosa Branca Esteves, 2007. "Customer Poaching and Advertising," NIPE Working Papers 12/2007, NIPE - Universidade do Minho. [Downloadable!]
  11. Il-Horn Hann & Kai-Lung Hui & Sang-Yong Tom Lee & Ivan P.L. Png, 2005. "Sales and Promotions: A More General Model," Industrial Organization 0508014, EconWPA. [Downloadable!]
  12. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June. [Downloadable!] (restricted)
  13. Giovanni Immordino, 2007. "Advertising and Cost Reduction," CSEF Working Papers 177, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
  14. Costas Arkolakis, 2008. "Market Penetration Costs and the New Consumers Margin in International Trade," NBER Working Papers 14214, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Michael Sandfort & Hideo Konishi, 2000. "Expanding Demand through Price Advertisement," Boston College Working Papers in Economics 453, Boston College Department of Economics, revised 21 Jun 2001. [Downloadable!]
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  16. Ulrich Doraszelski & Sarit Markovich, 2004. "Advertising Dynamics and Competitive Advantage," Computing in Economics and Finance 2004 61, Society for Computational Economics. [Downloadable!]
  17. Andrea Galeotti & José Luis Moraga-González, 2004. "A Model of Strategic Targeted Advertising," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  18. Oksana Loginova, 2005. "Competing for Customers' Attention: Advertising When Consumers Have Imperfect Memory," Working Papers 0510, Department of Economics, University of Missouri, revised 15 Dec 2006. [Downloadable!]
  19. Greg Filbeck & Xin Zhao & Daniel Tompkins & Peggy Chong, 2009. "Share price reactions to advertising announcements and broadcast of media events," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(4), pages 253-264. [Downloadable!]
  20. Pastine, Ivan & Pastine, Tuvana, 2005. "Coordination in Markets with Consumption Externalities: The Role of Advertising and Product Quality," CEPR Discussion Papers 5152, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  21. Christou, Charalambos & Vettas, Nikolaos, 2003. "Informative Advertising and Product Differentiation," CEPR Discussion Papers 3953, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  22. Christian Jansen, 2003. "Convergence and the Potential Ban on Interactive Product Placement in Germany," Law and Economics 0302002, EconWPA. [Downloadable!]
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