An Analysis of Advertising Wars
AbstractComparative advertising by one brand against another showcases its merits versus the demerits of the other. In a two-stage game among finitely many firms, firms decide first on how much to advertise against whom. In the second stage, given the advertising configuration, firms compete as Cournot oligopolists. In the symmetric case, equilibrium advertising expenses constitute a clear welfare loss. Equilibrium advertising levels and advertising expenditures decline with rising advertising costs. Whereas equilibrium levels of advertising decrease in the number of firms, aggregate advertising expenditures increase. We further relate effectiveness of advertising to proximity in product space. With two firms, comparative advertising and quality choice have similar effects. In a three-stage game, where firms choose first locations (variety), then advertising levels (quality), and then quantities, we obtain maximum horizontal product differentiation and minimum vertical product differentiation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2002-03.
Length: 28 pages
Date of creation: Nov 2002
Date of revision:
Contact details of provider:
Postal: Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark
Phone: (0045) 35 32 30 54
Fax: +45 35 32 30 00
Web page: http://www.econ.ku.dk/cie/
More information through EDIRC
Advertising; Cournot Oligopoly; Product Differentiation;
Other versions of this item:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-04-02 (All new papers)
- NEP-COM-2003-04-02 (Industrial Competition)
- NEP-IND-2003-04-02 (Industrial Organization)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Billand, Pascal & Bravard, Christophe & Chakrabarti, Subhadip & Sarangi, Sudipta, 2010. "Networks of Collaboration in Multi-market Oligopolies," MPRA Paper 28188, University Library of Munich, Germany.
- Keisuke Hattori & Keisaku Higashida, 2012. "Who Benefits from Misleading Advertising?," Discussion Paper Series 85, School of Economics, Kwansei Gakuin University, revised Mar 2012.
- Billand, P. & Bravard, C. & Chakrabarti, S. & Sarangi, S., 2013. "A note on networks collaboration in multi-market oligopolies," Working Papers 2013-05, Grenoble Applied Economics Laboratory (GAEL).
- Maria Alipranti & Evangelos Mitrokostas & Emmanuel Petrakis, 2013. "Comparative versus Informative Advertising in Oligopolistic Markets," Working Papers 1301, University of Crete, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sabine Fischer).
If references are entirely missing, you can add them using this form.