Dynamic informative advertising of new experience goods:
AbstractThis paper analyzes the optimal advertising and price policies of a monopolist who sells a new experience good over time to a population of heterogeneous forward-looking buyers. We consider informative advertising that can complement or substitute for learning-by-purchasing, and show that the advertising intensity always peaks during the early stages when the price extracts surplus from the buyers who are yet to learn their valuation for the good. We also show that even though informative advertising may temporarily raise prices and slow down the learning process, an advertising ban can reduce welfare.
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Bibliographic InfoPaper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 1062.
Date of creation: 2011
Date of revision:
Advertising; experience goods; Learning; monopoly; private information;
Other versions of this item:
- Alexander E. Saak, 2012. "Dynamic Informative Advertising of New Experience Goods," Journal of Industrial Economics, Wiley Blackwell, vol. 60(1), pages 104-135, 03.
- Saak, Alexander E., 2011. "Dynamic Informative Advertising of New Experience Goods," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103536, Agricultural and Applied Economics Association.
- 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.
- NEP-ALL-2011-03-19 (All new papers)
- NEP-COM-2011-03-19 (Industrial Competition)
- NEP-CTA-2011-03-19 (Contract Theory & Applications)
- NEP-MKT-2011-03-19 (Marketing)
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