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comparative Advertising

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Author Info

  • 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.

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File URL: http://www.u-cergy.fr/thema/repec/2006-18.pdf
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Bibliographic 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
Date of revision:
Handle: RePEc:ema:worpap:2006-18

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Related research

Keywords: comparative advertising; information; product differentiation; quality;

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References

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  1. Anderson, Simon P & de Palma, Andre, 1988. "Spatial Price Discrimination with Heterogeneous Products," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 573-92, October.
  2. Simon P. Anderson & Régis Renault, 2002. "Advertising Content," Virginia Economics Online Papers 362, University of Virginia, Department of Economics.
  3. Anderson, S.P. & Renault, R., 1997. "Pricing, Product Diversity and Search Costs: A Bertrand-Chamberlin-Diamond Model," Papers 97.481, Toulouse - GREMAQ.
  4. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
  5. 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.
  6. 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 461-83, December.
  7. 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.
  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. Meurer, Michael & Stahl, Dale II, 1994. "Informative advertising and product match," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 1-19, March.
  10. Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 465-91, October.
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Cited by:
  1. Maria Alipranti & Evangelos Mitrokostas & Emmanuel Petrakis, 2013. "Comparative versus Informative Advertising in Oligopolistic Markets," Working Papers 1301, University of Crete, Department of Economics.
  2. 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.
  3. repec:hal:wpaper:halshs-00586867 is not listed on IDEAS
  4. repec:hal:wpaper:halshs-00587847 is not listed on IDEAS

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