comparative Advertising

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comparative Advertising

Author Info

Simon P. Anderson () (Department of Economics, University of Virginia)
Régis Renault () (Université de Cergy-Pontoise (Théma))

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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.

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Publisher Info
Paper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2006-18.

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Date of creation: 2006
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Handle: RePEc:ema:worpap:2006-18

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Find related papers by JEL classification:
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

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-11-18 (All new papers)
NEP-COM-2006-11-18 (Industrial Competition)
NEP-IPR-2006-11-18 (Intellectual Property Rights)
NEP-MIC-2006-11-18 (Microeconomics)
NEP-MKT-2006-11-18 (Marketing)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law & Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
Simon P. Anderson & Régis Renault, 2002. "Advertising Content," Virginia Economics Online Papers 362, University of Virginia, Department of Economics. [Downloadable!]
Other versions:
- Anderson, Simon P & Renault, Régis, 2005. "Advertising Content," CEPR Discussion Papers 5064, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Simon P. Anderson & Régis Renault, 2006. "Advertising Content," American Economic Review, American Economic Association, vol. 96(1), pages 93-113, March. [Downloadable!]
Kyle Bagwell, 2005. "The Economic Analysis of Advertising," Discussion Papers 0506-01, Columbia University, Department of Economics. [Downloadable!]
Other versions:
- Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier. [Downloadable!] (restricted)
Simon P. Anderson & André de Palma, 2000. "Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods too Low?," Virginia Economics Online Papers 349, University of Virginia, Department of Economics. [Downloadable!]
Other versions:
- Anderson,S.P. & de Palma,A., 1995. "Product Diversity in Asymmetric Oligopoly:Is the Quality of Consumer Goods Too Low?," Papers 9521, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
- Anderson, Simon P & de Palma, Andre, 2001. "Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods Too Low?," Journal of Industrial Economics, Blackwell Publishing, vol. 49(2), pages 113-35, June. [Downloadable!] (restricted)
Anderson, Simon P & de Palma, Andre, 1988. "Spatial Price Discrimination with Heterogeneous Products," Review of Economic Studies, Blackwell Publishing, vol. 55(4), pages 573-92, October. [Downloadable!] (restricted)
Meurer, Michael & Stahl, Dale II, 1994. "Informative advertising and product match," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 1-19, March. [Downloadable!] (restricted)
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. [Downloadable!] (restricted)
Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug.. [Downloadable!] (restricted)
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 721-42, August.
Other versions:
- Simon P. Anderson & Regis Renault, 1997. "Consumer Information and Firm Pricing: Negative Externalities from Improved Information," Virginia Economics Online Papers 338, University of Virginia, Department of Economics. [Downloadable!]
Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Blackwell Publishing, vol. 44(3), pages 465-91, October. [Downloadable!] (restricted)
Anderson, S.P. & Renault, R., 1997. "Pricing, Product Diversity and Search Costs: A Bertrand-Chamberlin-Diamond Model," Papers 97.481, Toulouse - GREMAQ.
Other versions:
- Simon P. Anderson & Regis Renault, 1999. "Pricing, product diversity, and search costs: a Bertrand-Chamberlin-Diamond model," Virginia Economics Online Papers 335, University of Virginia, Department of Economics. [Downloadable!]
- 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. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Reynald-Alexandre Laurent, 2008. "Product innovation and imitation in a duopoly with differentiation by attributes," PSE Working Papers 2008-04, PSE (Ecole normale supérieure). [Downloadable!]
Reynald-Alexandre Laurent, 2007. "Probalilistic duopoly with differentiation by attributes," PSE Working Papers 2007-27, PSE (Ecole normale supérieure). [Downloadable!]

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