IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpio/9508003.html
   My bibliography  Save this paper

A Simple Model of Informative Advertising

Author

Listed:
  • 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.

Suggested Citation

  • Paulo Guimaraes, 1995. "A Simple Model of Informative Advertising," Industrial Organization 9508003, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpio:9508003
    Note: 17 pages, WP 5.1 for DOS, formatted for HP 4L
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/9508/9508003.pdf
    Download Restriction: no
    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/9508/9508003.doc.gz
    Download Restriction: no
    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/9508/9508003.ps.gz
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 493-510.
    2. Nicholas Kaldor, 1950. "The Economic Aspects of Advertising," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 18(1), pages 1-27.
    3. 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..
    4. Louis L. Wilde & Alan Schwartz, 1979. "Equilibrium Comparison Shopping," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(3), pages 543-553.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ed Hopkins & Robert M. Seymour, "undated". "Price Dispersion: an Evolutionary Approach," ELSE working papers 043, ESRC Centre on Economics Learning and Social Evolution.
    2. Stahl, Dale O., 1996. "Oligopolistic pricing with heterogeneous consumer search," International Journal of Industrial Organization, Elsevier, vol. 14(2), pages 243-268.
    3. Burdett, Kenneth, 1989. "Search Market Models: A Survey," Working Paper Series 234, Research Institute of Industrial Economics.
    4. Alfredo Martín-Oliver & Vicente Salas-Fumás & Jesús Saurina, 2005. "Interest rate dispersion in deposit and loan markets," Working Papers 0506, Banco de España.
    5. repec:hal:spmain:info:hdl:2441/jeo70lroq9p9bmeio80mpgg5h is not listed on IDEAS
    6. Kathy Baylis & Jeffrey Perloff, 2002. "Price Dispersion on the Internet: Good Firms and Bad Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 21(3), pages 305-324, November.
    7. Lester M.K. Kwong, 2003. "Coupons and ‘everyday low prices’: price competition with multiple instruments," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(2), pages 443-462, May.
    8. Adrienne Ohler & Vincent Smith, 2013. "Population Characteristics And Price Dispersion In The Market For Prescription Drugs," Contemporary Economic Policy, Western Economic Association International, vol. 31(3), pages 486-502, July.
    9. Ireland, Norman J., 2002. "Firms’ Strategies for Reducing the Effectiveness of Consumer Price Search," Economic Research Papers 269401, University of Warwick - Department of Economics.
    10. Ed Hopkins & Robert M. Seymour, 2002. "The Stability of Price Dispersion under Seller and Consumer Learning," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1157-1190, November.
    11. Fishman, Arthur, 1992. "Search Technology, Staggered Price-Setting, and Price Dispersion," American Economic Review, American Economic Association, vol. 82(1), pages 287-298, March.
    12. Garcia, René, 1986. "La théorie économique de l’information : exposé synthétique de la littérature," L'Actualité Economique, Société Canadienne de Science Economique, vol. 62(1), pages 88-109, mars.
    13. Donna, Javier D. & Schenone, Pablo & Veramendi, Gregory F., 2020. "Networks, frictions, and price dispersion," Games and Economic Behavior, Elsevier, vol. 124(C), pages 406-431.
    14. Ben-Shahar, Danny & Golan, Roni, 2022. "Price dispersion and time-on-market in the housing market," Journal of Housing Economics, Elsevier, vol. 58(PB).
    15. Philip Bond & David K. Musto & Bilge Yilmaz, 2006. "Predatory lending in rational world," Working Papers 06-2, Federal Reserve Bank of Philadelphia.
    16. Mitchell Berlin & Loretta J. Mester, 2004. "Credit card rates and consumer search," Review of Financial Economics, John Wiley & Sons, vol. 13(1-2), pages 179-198.
    17. Adrienne M. Ohler, 2011. "Who Searches for Low Prices? Population Characteristics and Price Dispersion in the Market for Prescription Drugs," Working Paper Series 20110701, Illinois State University, Department of Economics.
    18. Yoris A. Au, 2009. "Credit Card Payment Processing in Electronic Commerce: An Analysis of the Bucket Pricing Strategy," Working Papers 0091, College of Business, University of Texas at San Antonio.
    19. Pedro Cosme Costa Vieira, 2004. "Market equilibrium with FSS search," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 323-324.
    20. Zakaria Babutsidze, 2017. "Duopolistic Price Competition with Captives," Metroeconomica, Wiley Blackwell, vol. 68(4), pages 903-926, November.
    21. Perloff, Jeffrey M & Salop, Steven C, 1986. "Firm-Specific Information, Product Differentiation, and Industry Equilibrium," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 184-202, Suppl. No.

    More about this item

    JEL classification:

    • L - Industrial Organization

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpio:9508003. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.