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Informative Advertising Competition

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  • Greg LeBlanc

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.

Suggested Citation

  • Greg LeBlanc, 1998. "Informative Advertising Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 46(1), pages 63-77, March.
    • Handle: RePEc:bla:jindec:v:46:y:1998:i:1:p:63-77
    DOI: 10.1111/1467-6451.00061
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    Cited by:

    1. Zhang, Mingxia & Sexton, Richard J. & Alston, Julian M., 2002. "Does Branded Food Product Advertising Help Or Hurt Farmers?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(2), pages 1-25, December.
    2. Uwe Dulleck & Paul Frijters & Konrad Podczeck, 2006. "All-pay auctions with budget constraints and fair insurance," Economics working papers 2006-13, Department of Economics, Johannes Kepler University Linz, Austria.
    3. 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.
    4. Han, Bing & Chouinard, Hayley H., 2014. "Product quality, advertising intensity and market size," Economics Letters, Elsevier, vol. 124(2), pages 215-218.
    5. Uwe Dulleck & Paul Frijters & Konrad Podczeck, 2006. "All-pay auctions with budget constraints and fair insurance," Economics working papers 2006-13, Department of Economics, Johannes Kepler University Linz, Austria.
    6. Gorkem Bostanci & Pinar Yildirim & Kinshuk Jerath, 2023. "Negative Advertising and Competitive Positioning," Management Science, INFORMS, vol. 69(4), pages 2361-2382, April.
    7. Nilssen,T. & Sorgard,L., 2000. "Strategic informative advertising in a TV-advertising duopoly," Memorandum 17/2000, Oslo University, Department of Economics.
    8. Babutsidze, Zakaria, 2009. "Learning How to Consume and Returns to Product Promotion," MERIT Working Papers 2009-018, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. 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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