Dynamic Informative Advertising of New Experience Goods
AbstractThis paper analyzes the optimal advertising and price policies of a monopolist who sells a new experience good over time to a population of heterogeneous forward-looking buyers. We consider informative advertising that can complement or substitute for learning-by-purchasing, and show that the advertising intensity always peaks during the early stages when the price extracts surplus from the buyers who are yet to learn their valuation for the good. We also show that even though informative advertising may temporarily raise prices and slow down the learning process, an advertising ban can reduce welfare.
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Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania with number 103536.
Date of creation: 2011
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Monopoly; Advertising; Experience Goods; Learning; Private Information; Agribusiness; Agricultural and Food Policy; Demand and Price Analysis; Industrial Organization; Marketing;
Other versions of this item:
- Alexander E. Saak, 2012. "Dynamic Informative Advertising of New Experience Goods," Journal of Industrial Economics, Wiley Blackwell, vol. 60(1), pages 104-135, 03.
- Saak, Alexander E., 2011. "Dynamic informative advertising of new experience goods:," IFPRI discussion papers 1062, International Food Policy Research Institute (IFPRI).
- Saak, Alexander E., 2010. "Dynamic Informative Advertising of New Experience Goods," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61326, Agricultural and Applied Economics Association.
- NEP-ALL-2011-05-24 (All new papers)
- NEP-COM-2011-05-24 (Industrial Competition)
- NEP-CTA-2011-05-24 (Contract Theory & Applications)
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