Advanced Search
MyIDEAS: Login to save this article or follow this journal

The Advertising Mix for a Search Good

Contents:

Author Info

  • Simon P. Anderson

    ()
    (Department of Economics, University of Virginia, Charlottesville, Virginia 22904)

  • Régis Renault

    ()
    (THEMA, Université de Cergy-Pontoise, 95011 Cergy Cedex, France)

Abstract

We extend the persuasion game to bring it squarely into the economics of advertising. We model advertising as exciting consumer interest into learning more about the product, and determine a firm's equilibrium choice of advertising content over quality information, price information, and horizontal match information. Equilibrium is unique whenever advertising is necessary. The outcome is a separating equilibrium with quality unravelling. Lower-quality firms need to provide more information. For a given quality level, as a function of consumer visit costs, first quality information is disclosed, then price information and then horizontal product information are added to the advertising mix. Some suggestive evidence is provided from airline ads in newspapers. This paper was accepted by J. Miguel Villas-Boas, marketing.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://dx.doi.org/10.1287/mnsc.1120.1575
Download Restriction: no

Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 59 (2013)
Issue (Month): 1 (April)
Pages: 69-83

as in new window
Handle: RePEc:inm:ormnsc:v:59:y:2013:i:1:p:69-83

Contact details of provider:
Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA
Phone: +1-443-757-3500
Fax: 443-757-3515
Email:
Web page: http://www.informs.org/
More information through EDIRC

Related research

Keywords: persuasion game; advertising; search; content analysis; information;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Nitin Mehta & Xinlei (Jack) Chen & Om Narasimhan, 2008. "Informing, Transforming, and Persuading: Disentangling the Multiple Effects of Advertising on Brand Choice Decisions," Marketing Science, INFORMS, vol. 27(3), pages 334-355, 05-06.
  2. Rob, Rafael, 1985. "Equilibrium Price Distributions," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 487-504, July.
  3. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
  4. Kihlstrom, Richard E & Riordan, Michael H, 1984. "Advertising as a Signal," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 427-50, June.
  5. Emir Kamenica & Matthew Gentzkow, 2011. "Bayesian Persuasion," American Economic Review, American Economic Association, vol. 101(6), pages 2590-2615, October.
  6. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  7. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  8. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Steven Matthews & Andrew Postlewaite, 1985. "Quality Testing and Disclosure," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 328-340, Autumn.
  10. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
  11. Liang Guo & Ying Zhao, 2009. "Voluntary Quality Disclosure and Market Interaction," Marketing Science, INFORMS, vol. 28(3), pages 488-501, 05-06.
  12. Paul Milgrom, 2007. "What the Seller Won’t Tell You: Persuasion and Disclosure in Markets," Levine's Bibliography 843644000000000045, UCLA Department of Economics.
  13. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
  14. Heski Bar-Isaac & Guillermo Caruana & Vicente Cunat, 2008. "Information Gathering and Marketing," Working Papers 08-17, New York University, Leonard N. Stern School of Business, Department of Economics.
  15. Tülin Erdem & Michael P. Keane & Baohong Sun, 2008. "A Dynamic Model of Brand Choice When Price and Advertising Signal Product Quality," Marketing Science, INFORMS, vol. 27(6), pages 1111-1125, 11-12.
  16. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
  17. Michael Yee & Ely Dahan & John R. Hauser & James Orlin, 2007. "Greedoid-Based Noncompensatory Inference," Marketing Science, INFORMS, vol. 26(4), pages 532-549, 07-08.
  18. Bharat N. Anand & Ron Shachar, 2011. "Advertising, the matchmaker," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 205-245, 06.
  19. Meurer, Michael & Stahl, Dale II, 1994. "Informative advertising and product match," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 1-19, March.
  20. Konishi, Hideo & Sandfort, Michael T., 2002. "Expanding demand through price advertisement," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 965-994, September.
  21. Ajay Kalra & Shibo Li, 2008. "Signaling Quality Through Specialization," Marketing Science, INFORMS, vol. 27(2), pages 168-184, 03-04.
  22. Oliver Board, 2009. "COMPETITION AND DISCLOSURE -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 57(1), pages 197-213, 03.
  23. Ganesh Iyer & David Soberman & J. Miguel Villas-Boas, 2005. "The Targeting of Advertising," Marketing Science, INFORMS, vol. 24(3), pages 461-476, May.
  24. Stahl, Dale O., 1996. "Oligopolistic pricing with heterogeneous consumer search," International Journal of Industrial Organization, Elsevier, vol. 14(2), pages 243-268.
  25. Nitin Mehta & Surendra Rajiv & Kannan Srinivasan, 2003. "Price Uncertainty and Consumer Search: A Structural Model of Consideration Set Formation," Marketing Science, INFORMS, vol. 22(1), pages 58-84, June.
  26. Jie Zhang & Lakshman Krishnamurthi, 2004. "Customizing Promotions in Online Stores," Marketing Science, INFORMS, vol. 23(4), pages 561-578, June.
  27. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  28. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
  29. Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 465-91, October.
  30. Carl Shapiro, 1980. "Advertising and Welfare: Comment," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 749-752, Autumn.
  31. Saak, Alexander E., 2006. "The optimal private information in single unit monopoly," Economics Letters, Elsevier, vol. 91(2), pages 267-272, May.
  32. Wilfred Amaldoss & Chuan He, 2009. "Direct-to-Consumer Advertising of Prescription Drugs: A Strategic Analysis," Marketing Science, INFORMS, vol. 28(3), pages 472-487, 05-06.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:59:y:2013:i:1:p:69-83. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.