Comparative Advertising in Markets with Network Externalities
AbstractThe present paper investigates the firms' incentives to invest in comparative advertising in a spatially differentiated duopoly market characterized by network externalities. We show that for a wide range of locations, determined by the interaction between the transportation cost, the network effects and the effectiveness of advertising, firms have incentives to invest in comparative advertising with their investment levels to be positively related to the transportation cost and negatively related to the network effects. Further, comparing the equilibrium results of our model with the benchmark case without advertising activities and the case without network externalities, we show that the firms' location distance increases in the presence of network externalities, while it decreases in the presence of comparative advertising.
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Bibliographic InfoPaper provided by University of Crete, Department of Economics in its series Working Papers with number 1306.
Date of creation: 29 Aug 2012
Date of revision: 08 May 2013
Comparative Advertising; Network Effects; Location;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-22 (All new papers)
- NEP-COM-2013-05-22 (Industrial Competition)
- NEP-CWA-2013-05-22 (Central & Western Asia)
- NEP-IND-2013-05-22 (Industrial Organization)
- NEP-MKT-2013-05-22 (Marketing)
- NEP-NET-2013-05-22 (Network Economics)
- NEP-ORE-2013-05-22 (Operations Research)
- NEP-URE-2013-05-22 (Urban & Real Estate Economics)
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