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Comparative Advertising: disclosing horizontal match information

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  • Simon P. ANDERSON

    ()
    (Department of Economics, University of Virginia)

  • Régis RENAULT

    ()
    (THEMA, University of Cergy-Pontoise)

Abstract

Improved consumer information about (symmetric) products can lead to better matching but also higher prices, so consumer surplus can go up or down, while profits rise. With enough firm asymmetry though, the stronger firm's price falls with more information, so both effects benefit consumers. This is when comparative advertising is used, against a large firm by a small one. Comparative advertising, as it imparts more information, therefore helps consumers. While it also improves profitability of the small firm, overall welfare goes down because of the large loss to the attacked firm.

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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 2008-29.

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Date of creation: 2008
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Handle: RePEc:ema:worpap:2008-29

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

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