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Price Advertising and Coupons in a Monopoly Model

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  • Caminal, Ramon

Abstract

The paper studies the pricing and advertising policies of a monopolist in a situation where consumers discover prices by costly search. The monopolist is shown to choose between no advertising and large scale advertising. This is shown to be optimal behavior even with decreasing returns to scale to advertising expenditures which would a priori argue for small advertising expenditures. The optimal advertising policy is undertaken in conjunction with a pricing policy that is characterized by downwardly rigid prices. Flexibility with regard to realizations of a cost parameter is achieved via couponing, which, even though it is untargeted, allows for discrimination between ex ante identical consumers. Copyright 1996 by Blackwell Publishing Ltd.

Suggested Citation

  • Caminal, Ramon, 1996. "Price Advertising and Coupons in a Monopoly Model," Journal of Industrial Economics, Wiley Blackwell, vol. 44(1), pages 33-52, March.
  • Handle: RePEc:bla:jindec:v:44:y:1996:i:1:p:33-52
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    Cited by:

    1. David Paton, 1998. "Who A dvertises Prices? A Firm Level Study Based on Survey Data," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(1), pages 57-75.
    2. Lola Esteban & Jose M. Hernandez & Jose Luis Moraga-Gonzalez, 2001. "Customer Directed Advertising and Product Quality," Tinbergen Institute Discussion Papers 01-099/1, Tinbergen Institute.
    3. Collinge, Robert A. & De La Cruz, Justino, 1999. "Easing Countries' Transitions From Price Controls and Subsidies," World Development, Elsevier, vol. 27(2), pages 375-380, February.
    4. Uri Ben-Zion & Aharon Hibshoosh & Uriel Spiegel, 2000. "Price Discrimination by Coupons Restriction," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 7(3), pages 325-331.
    5. Cason, Timothy N. & Datta, Shakun, 2006. "An experimental study of price dispersion in an optimal search model with advertising," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 639-665, May.
    6. Connor, John M., 1997. "Couponing As A Horizontal And Vertical Strategy: Theory And Effects," Working Papers 14344, University of Minnesota, The Food Industry Center.

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