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Informative Advertising Competition

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  • LeBlanc, Greg
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    Abstract

    This paper investigates informative price advertising in an established-product Hotelling duopoly where firms compete for shares of a fixed market. Prices are uncertain because firms' costs are private information. For a sufficiently low cost of advertising, advertising necessarily arises in equilibrium. Also, the less balanced the initial distributions over costs, the greater the potential for informative advertising. Moreover, whenever firms use informative advertising, it increases the firms' expected profits, and social welfare, relative to the outcome without advertising. Copyright 1998 by Blackwell Publishing Ltd

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

    Volume (Year): 46 (1998)
    Issue (Month): 1 (March)
    Pages: 63-77

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    Handle: RePEc:bla:jindec:v:46:y:1998:i:1:p:63-77

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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    Cited by:
    1. Uwe Dulleck & Paul Frijters & Konrad Podczeck, 2006. "All-pay Auctions with Budget Constraints and Fair Insurance," Vienna Economics Papers 0605, University of Vienna, Department of Economics.
    2. 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.
    3. Nilssen,T. & Sorgard,L., 2000. "Strategic informative advertising in a TV-advertising duopoly," Memorandum 17/2000, Oslo University, Department of Economics.
    4. Stivers, Andrew & Tremblay, Victor J., 2005. "Advertising, search costs, and social welfare," Information Economics and Policy, Elsevier, vol. 17(3), pages 317-333, July.

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