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Persuading consumers with social attitudes

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  • Buehler, Stefan
  • Halbheer, Daniel

Abstract

This paper provides a formal analysis of persuasive advertising when firms compete for consumers with heterogenous social attitudes towards the consumption by others. Deriving product demand from primitives, we show that the demand-enhancing effect of persuasive advertising varies across consumers and increases in the average degree of conformity. In equilibrium, both quality and cost leaders choose higher advertising intensities and charge higher prices than their competitors. In addition, we show that an increase in the average degree of conformity among consumers reinforces asymmetries between firms.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 84 (2012)
Issue (Month): 1 ()
Pages: 439-450

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Handle: RePEc:eee:jeborg:v:84:y:2012:i:1:p:439-450

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Web page: http://www.elsevier.com/locate/jebo

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Keywords: Advertising; Social attitude; Consumption externality; Quality;

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Cited by:
  1. Nick Vikander, 2014. "Sellouts, Beliefs, and Bandwagon Behavior," Discussion Papers 14-15, University of Copenhagen. Department of Economics.

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