The Advertising Mix for a Search Good
AbstractWe 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.
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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 59 (2013)
Issue (Month): 1 (April)
persuasion game; advertising; search; content analysis; information;
Other versions of this item:
- Anderson, Simon P & Renault, Régis, 2012. "The advertising mix for a search good," CEPR Discussion Papers 8756, C.E.P.R. Discussion Papers.
- Renault, Régis & Anderson, Simon P., 2013. "The Advertising Mix for a Search Good," Economics Papers from University Paris Dauphine 123456789/12407, Paris Dauphine University.
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
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