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comparative Advertising

Author

Listed:
  • Simon P. Anderson

    (Department of Economics, University of Virginia)

  • Régis Renault

    (Université de Cergy-Pontoise (Théma))

Abstract

Consumer information on products affects competition and profits. We analyze firms' decisions to impart product information through advertising: comparative advertising also allows them to impart information about rivals' products. If firms sell products of similar qualities, both want to advertise detailed product information that enables consumers to determine their matches: there is no role for comparative advertising. If qualities are sufficiently dissimilar, the high-quality one will not want to disclose match information. If legal, the low-quality firm rival would like to advertise match information about its rival. Such "comparative" advertising may have a detrimental impact on welfare by leading more consumers to consume the low quality product: this effect can dominate the benefits from improved consumer information and reduce social welfare if qualities are different enough.

Suggested Citation

  • Simon P. Anderson & Régis Renault, 2006. "comparative Advertising," THEMA Working Papers 2006-18, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2006-18
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    File URL: http://thema.u-cergy.fr/IMG/documents/2006-18.pdf
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    References listed on IDEAS

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    1. 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 461-483, December.
    2. Simon P. Anderson & Régis Renault, 2006. "Advertising Content," American Economic Review, American Economic Association, vol. 96(1), pages 93-113, March.
    3. Simon P. Anderson & Regis Renault, 1999. "Pricing, Product Diversity, and Search Costs: A Bertrand-Chamberlin-Diamond Model," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 719-735, Winter.
    4. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
    5. Simon P. Anderson & André de Palma, 2001. "Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods too Low?," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 113-135, June.
    6. Anderson, Simon P & Renault, Regis, 2000. "Consumer Information and Firm Pricing: Negative Externalities from Improved Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(3), pages 721-742, August.
    7. Meurer, Michael & Stahl, Dale II, 1994. "Informative advertising and product match," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 1-19, March.
    8. Shin Hyun Song, 1994. "The Burden of Proof in a Game of Persuasion," Journal of Economic Theory, Elsevier, vol. 64(1), pages 253-264, October.
    9. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 465-491.
    10. Simon P. Anderson & André De Palma, 1988. "Spatial Price Discrimination with Heterogeneous Products," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(4), pages 573-592.
    11. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 28, pages 1701-1844, Elsevier.
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    Citations

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    Cited by:

    1. Alexander E. Saak, 2012. "Dynamic Informative Advertising of New Experience Goods," Journal of Industrial Economics, Wiley Blackwell, vol. 60(1), pages 104-135, March.
    2. Reynald-Alexandre Laurent, 2008. "Product innovation and imitation in a duopoly with differentiation by attributes," Working Papers halshs-00586867, HAL.
    3. Laurent Reynald-Alexandre, 2007. "Probalilistic duopoly with differentiation by attributes," Working Papers halshs-00587847, HAL.
    4. Maria Alipranti & Evangelos Mitrokostas & Emmanuel Petrakis, 2013. "Comparative versus Informative Advertising in Oligopolistic Markets," Working Papers 1301, University of Crete, Department of Economics.

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    More about this item

    Keywords

    comparative advertising; information; product differentiation; quality;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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