An Analysis Of Advertising Wars
AbstractComparative advertising by one brand against another showcases its merits versus the demerits of the other. In a two-stage game among finitely many firms, firms decide first on how much to advertise against whom. In the second stage, given the advertising configuration, firms compete as Cournot oligopolists. In the symmetric case, equilibrium advertising expenses constitute a clear welfare loss. Equilibrium advertising levels and advertising expenditures decline with rising advertising costs. Whereas equilibrium levels of advertising decrease in the number of firms, aggregate advertising expenditures increase. We further relate effectiveness of advertising to proximity in product space. With two firms, comparative advertising and quality choice have similar effects. In a three-stage game, where firms choose first locations (variety), then advertising levels (quality), and then quantities, we obtain maximum horizontal product differentiation and minimum vertical product differentiation.
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Bibliographic InfoArticle provided by University of Manchester in its journal The Manchester School.
Volume (Year): 79 (2011)
Issue (Month): 1 (January)
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Other versions of this item:
- Hans Haller & Subhadip Chakrabarti, 2002. "An Analysis of Advertising Wars," CIE Discussion Papers 2002-03, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- Hans Haller & Subhadip Chakrabarti, 2003. "An Analysis of Advertising Wars," Industrial Organization 0306002, EconWPA.
- Hans Haller & Subhadip Chakrabarti, 2003. "An Analysis of Advertising Wars," Microeconomics 0306005, EconWPA.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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- Billand, P. & Bravard, C. & Chakrabarti, S. & Sarangi, S., 2013. "A note on networks collaboration in multi-market oligopolies," Working Papers 2013-05, Grenoble Applied Economics Laboratory (GAEL).
- Maria Alipranti & Evangelos Mitrokostas & Emmanuel Petrakis, 2013. "Comparative versus Informative Advertising in Oligopolistic Markets," Working Papers 1301, University of Crete, Department of Economics.
- Billand, Pascal & Bravard, Christophe & Chakrabarti, Subhadip & Sarangi, Sudipta, 2010. "Networks of Collaboration in Multi-market Oligopolies," MPRA Paper 28188, University Library of Munich, Germany.
- Keisuke Hattori & Keisaku Higashida, 2012. "Who Benefits from Misleading Advertising?," Discussion Paper Series 85, School of Economics, Kwansei Gakuin University, revised Mar 2012.
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