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A Simple Model of Informative Advertising

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  • Paulo Guimaraes

    (University of Minho, Portugal)

Abstract

This paper presents an oligopolistic model of informative advertising, where firms simultaneously choose prices and advertising intensities. For this game there is a dispersed price equilibrium in which the amount of advertising by each firm is socially optimal. The advertising technology considered is more general than in Butters, however his results can be obtained as the number of firms tends to infinity. For some advertising technologies entry leads to a market contraction; we can also observe situations where increases in advertising costs lead to higher profits. This model can be used as a "benchmark" against which other models of informative advertising can be compared.

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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 9508003.

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Length: 17 pages
Date of creation: 14 Aug 1995
Date of revision:
Handle: RePEc:wpa:wuwpio:9508003

Note: 17 pages, WP 5.1 for DOS, formatted for HP 4L
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Web page: http://128.118.178.162

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  1. Salop, Steven & Stiglitz, Joseph E, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 493-510, October.
  2. Rothschild, Michael, 1973. "Models of Market Organization with Imperfect Information: A Survey," Journal of Political Economy, University of Chicago Press, vol. 81(6), pages 1283-1308, Nov.-Dec..
  3. Wilde, Louis L. & Schwartz, Alan., . "Equilibrium Comparison Shopping," Working Papers 184, California Institute of Technology, Division of the Humanities and Social Sciences.
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