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Non-comparative versus Comparative Advertising as a Quality Signal

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  • Emons, Winand
  • Fluet, Claude

Abstract

Two firms produce a product with a horizontal and a vertical characteristic. We call the vertical characteristic quality. The difference in the quality levels determines how the firms share the market. Firms know the quality levels, consumers do not. Under non-comparative advertising a firm may signal its own quality. Under comparative advertising firms may signal the quality differential. In both scenarios the firms may attempt to mislead at a cost. If firms advertise, in both scenarios equilibria are revealing. Under comparative advertising the firms never advertise together which they may do under non-comparative advertising.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7109.

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Date of creation: Jan 2009
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Handle: RePEc:cpr:ceprdp:7109

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Keywords: advertising; costly state falsification; signalling;

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References

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  1. Fluet, Claude & Garella, Paolo G., 2002. "Advertising and prices as signals of quality in a regime of price rivalry," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 907-930, September.
  2. Mailath, George J, 1987. "Incentive Compatibility in Signaling Games with a Continuum of Types," Econometrica, Econometric Society, vol. 55(6), pages 1349-65, November.
  3. Renault, Régis & Anderson, Simon P., 2009. "Comparative advertising: disclosing horizontal match information," Economics Papers from University Paris Dauphine 123456789/12478, Paris Dauphine University.
  4. Winand Emons & Claude Fluet, 2007. "Accuracy versus Falsification Costs: the Optimal Amount of Evidence under Different Procedures," Cahiers de recherche 0703, CIRPEE.
  5. 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.
  6. Mark N. Hertzendorf & Per Baltzer Overgaard, 2001. "Price Competition and Advertising Signals: Signaling by Competing Senders," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(4), pages 621-662, December.
  7. Christian Schultz, 1997. "Limit Pricing when Incumbents have Conflicting Interests," CIE Discussion Papers 1997-17, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  8. Anderson, Simon & Ciliberto, Federico & Liaukonyte, Jura, 2010. "Getting into Your Head(Ache): The Information Content of Advertising in the Over-the-Counter Analgesics Industry," MPRA Paper 24916, University Library of Munich, Germany.
  9. F. Barigozzi & M. Peitz, 2004. "Comparative Advertising and Competition Policy," Working Papers 524, Dipartimento Scienze Economiche, Universita' di Bologna.
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Citations

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Cited by:
  1. Winand Emons & Claude Fluet, 2009. "Adversarial versus Inquisitorial Testimony," Diskussionsschriften dp0904, Universitaet Bern, Departement Volkswirtschaft.
  2. Maria Alipranti & Evangelos Mitrokostas & Emmanuel Petrakis, 2013. "Comparative versus Informative Advertising in Oligopolistic Markets," Working Papers 1301, University of Crete, Department of Economics.
  3. Renault, Régis & Liaukonyte, Jura & Ciliberto, Federico & Anderson, Simon, 2012. "Push-Me Pull-You: Comparative Advertising in the OTC Analgesics Industry," Economics Papers from University Paris Dauphine 123456789/12285, Paris Dauphine University.

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