Advanced Search
MyIDEAS: Login

Advertising and price signaling of quality in a duopoly with endogenous locations

Contents:

Author Info

  • Bontems, P.
  • Meunier, V.

Abstract

We analyze a two-sender quality-signaling game in a duopoly model where goods are horizontally and vertically differentiated. While locations are chosen under quality undertainty, firms choose prices and advertising expenditures being privately informed about their thpes. We show that pure price separation is impossible, and that dissipative advertising is necessary to ensure existence of separating equilibria. Equilibrium refinements discard all pooling equilibria and select a unique separating equilibrium. When vertical differentiation is not too high, horizontal differentiation is at a maximum, the high-quality firm advertises, and both firms adopt prices that are distorted upwards (compared to the symmetric-informati on benchmark). When vertical differentiation is high, firms choose identical locations and espost, only the high-quality firm obtains positive profits and signals its type through advertising only. Incomplete information and the subsequant signaling activity are chowh to increase the set of parameters values for which maximum horizontal differentiation occurs. ...French Abstract : Les auteurs étudient dans cet article, un modèle de concurrence au sein d'un duopole dans un contexte de différenciation horizontale. Les produits vendus par les firmes peuvent aussi potentiellement différer selon leur qualité. Les firmes choisissent tout d'abord leurs localisations de manière séquentielle puis simultanément leurs prix. A l'étape de localisation, la qualité du suiveur est connaissance commune tandis que la qualité du leader est incertaine mais révélée de manière privée avant l'étape de compétition par les prix. Ils montrent que la perspective de devoir signaler une qualité haute par le prix induit le leader à accroître au maximum la différenciation horizontale du produit. Ce résultat contraste fortement avec l'équilibre en information complète, qui peut impliquer une différenciation minimale ou intermédiaire selon les paramètres du modèle. Ainsi, le principe de différentiation maximale est restauré en présence d'information incomplète.

Download Info

If 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.
File URL: http://www.toulouse.inra.fr/centre/esr/wpRePEc/bon200603.pdf
Our checks indicate that this address may not be valid because: 404 Not Found (http://www.toulouse.inra.fr/centre/esr/wpRePEc/bon200603.pdf [301 Moved Permanently]--> http://www2.toulouse.inra.fr/centre/esr/wpRePEc/bon200603.pdf). If this is indeed the case, please notify (RAYNAL Helene)
Download Restriction: no

Bibliographic Info

Paper provided by French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse) in its series Economics Working Paper Archive (Toulouse) with number 200603.

as in new window
Length: 43 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:rea:inrawp:200603

Contact details of provider:
Postal: INRA ESR - BP27 - 31326 Castanet Tolosan cedex - France
Fax: (33) 5.61.28.53.72
Email:
Web page: http://www.toulouse.inra.fr/esr
More information through EDIRC

Order Information:
Postal: INRA ESR - BP27 - 31326 Castanet Tolosan cedex - France
Email:

Related research

Keywords: ADVERTISING; LOCATION CHOICE; QUALITY; INCOMPLETE INFORMATION; MULTI-SENDER SIGNALING GAME ; DIFFERENCIATION DES PRODUITS; PRIX; QUALITE DES PRODUITS; CONCURRENCE ECONOMIQUE; OLIGOPOLE;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "On Hotelling's "Stability in competition"," CORE Discussion Papers RP -385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Levent Çelik, 2008. "Strategic Informative Advertising in a Horizontally Differentiated Duopoly," CERGE-EI Working Papers wp359, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  2. Ding, Yucheng, 2014. "Why Branded Firm may Benefit from Counterfeit Competition," MPRA Paper 52933, University Library of Munich, Germany.
  3. Lionel Nesta & Roberto Fontana, 2007. "Product Innovation and Survival in a High-Tech Industry," Sciences Po publications 2007-30, Sciences Po.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:rea:inrawp:200603. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RAYNAL Helene).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.