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Misleading Advertising in Duopoly

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Author Info

  • Keisuke Hattori

    ()
    (Faculty of Economics, Osaka University of Economics)

  • Keisaku Higashida

    ()
    (School of Economics, Kwansei Gakuin University)

Abstract

In this paper, we build a model of strategic misleading advertising in duopolistic markets with horizontal product differentiation and advertising externality between firms. We investigate the effects of regulating misinformation on market competition, behavior of firms, and social welfare. We show that the degree of advertising externality and the magnitude of advertising costs are crucial for determining the welfare effects of several regulations, including prohibiting misleading advertising, educating consumers, taxing production, and taxing misleading advertising. We then extend the model by introducing two types of heterogeneities; heterogeneous consumers and heterogeneous production costs between firms.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp69.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 69.

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Length: 20 pages
Date of creation: Mar 2011
Date of revision: Mar 2011
Handle: RePEc:kgu:wpaper:69

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Related research

Keywords: Misleading Advertising; Regulation; Duopoly; Product Differentiation; Advertising Externality;

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Citations

Blog mentions

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  1. Why American politicians lie
    by Economic Logician in Economic Logic on 2011-04-08 14:20:00
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Cited by:
  1. Matsumura, Toshihiro & Sunada, Takeaki, 2013. "Advertising competition in a mixed oligopoly," Economics Letters, Elsevier, vol. 119(2), pages 183-185.
  2. Ursino, Giovanni & Piccolo, Salvatore & Tedeschi, Piero, 2012. "Deceptive advertising with rational buyers," MPRA Paper 42553, University Library of Munich, Germany.
  3. Keisuke Hattori & Keisaku Higashida, 2011. "When Government Misleads US: Sending Misinformation as Protectionist Devices," Discussion Paper Series 75, School of Economics, Kwansei Gakuin University, revised Aug 2011.
  4. Keisuke Hattori & Keisaku Higashida, 2012. "Who Benefits from Misleading Advertising?," Discussion Paper Series 85, School of Economics, Kwansei Gakuin University, revised Mar 2012.
  5. Keisuke Hattori & Keisaku Higashida, 2011. "Misleading Advertising and Minimum Quality Standards," Discussion Paper Series 74, School of Economics, Kwansei Gakuin University, revised Aug 2011.

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  1. Economic Logic blog

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