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On the Simple Economics of Advertising, Marketing, and Product Design

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Author Info
David P. Myatt
Justin P. Johnson

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Abstract

We propose a framework for analyzing transformations of demand. Such transformations frequently stem from changes in the dispersion of consumers` valuations, which lead to rotations of the demand curve. In a wide variety of settings, profits are a U-shaped function of dispersion. A high level of dispersion is complemented by a niche posture, and low dispersion is complemented by a mass-market posture. We investigate numerous applications of our framework, including product design; advertising, marketing and sales advice; and the construction of quality-differentiated product lines. We also suggest a new taxonomy of advertising, distinguishing between hype, which shifts demand, and real information, which rotates demand.

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Publisher Info
Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 185.

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Date of creation: 2004
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Handle: RePEc:oxf:wpaper:185

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Related research
Keywords: Monopoly; Uncertainty; Dispersion; Advertising; Marketing; Product Design; Product Lines; Price Discrimination;

Other versions of this item:

Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
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    Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bose, Subir & Orosel, Gerhard O & Ottaviani, Marco & Vesterlund, Lise, 2005. "Dynamic Monopoly Pricing and Herding," CEPR Discussion Papers 5003, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Marco LiCalzi, 2005. "A sufficient condition for all-or-nothing information supply in price discrimination," Game Theory and Information 0510005, EconWPA. [Downloadable!]
  3. Simon Cowan, 2004. "Demand shifts and imperfect competition," Economics Series Working Papers 188, University of Oxford, Department of Economics. [Downloadable!]
  4. Chenghuan Sean Chu, 2008. "The effect of satellite entry on product quality for cable television," Finance and Economics Discussion Series 2008-12, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  5. Ireland, Norman & Waterson, Michael, 2006. "Cartels and Search," The Warwick Economics Research Paper Series (TWERPS) 770, University of Warwick, Department of Economics. [Downloadable!]
  6. Heski Bar-Isaac & Guillermo Caruana & Vicente Cunat, 2008. "Information Gathering and Marketing," Working Papers 08-17, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
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