Advertising as Information: Matching Products to Buyers
AbstractWe consider communication of quality via cheap talk and dissipative advertising expenditures, when consumers have heterogeneous tastes for quality, and price information must be acquired through costly search. For search goods, cheap talk communicates quality when fixed costs are roughly constant across quality levels, while if fixed costs vary greatly with quality, then firms having the higher fixed-cost quality level use dissipative advertising. For experience goods, quality can be communicated by cheap talk in a range where low-quality firms have greater fixed costs, and low-quality firms use dissipative advertising if their fixed costs are greater still. Copyright 1993 by MIT Press.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.
Volume (Year): 2 (1993)
Issue (Month): 2 (Summer)
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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/
Other versions of this item:
- Kyle Bagwell & Garey Ramey, 1992. "Advertising as Information: Matching Products to Buyers," Discussion Papers 1005, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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