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Strategic Underinvestment in Informative Advertising: The Cases of Substitutes and Complements

Author

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  • Marcel Boyer
  • Michel Moreaux

Abstract

The authors analyze the strategic pricing and informative advertising decisions made by firms in duopolistic contexts. They show that, whether the products are substitutes or complements, there exist strategic settings in which firms keep potential consumers uninformed about their products even if the advertising cost is zero.

Suggested Citation

  • Marcel Boyer & Michel Moreaux, 1999. "Strategic Underinvestment in Informative Advertising: The Cases of Substitutes and Complements," Canadian Journal of Economics, Canadian Economics Association, vol. 32(3), pages 654-672, May.
    • Handle: RePEc:cje:issued:v:32:y:1999:i:3:p:654-672
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    Cited by:

    1. Ulrich Doraszelski & Sarit Markovich, 2007. "Advertising dynamics and competitive advantage," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 557-592, September.
    2. C. Clark & Ulrich Doraszelski & Michaela Draganska, 2009. "The effect of advertising on brand awareness and perceived quality: An empirical investigation using panel data," Quantitative Marketing and Economics (QME), Springer, vol. 7(2), pages 207-236, June.
    3. Draganska, Michaela & Klapper, Daniel, 2010. "Choice Set Heterogeneity and the Role of Advertising: An Analysis with Micro and Macro Data," Research Papers 2063, Stanford University, Graduate School of Business.
    4. Shi Qi, 2008. "Advertising, Entry Deterrence, and Industry Innovation," Working Papers 2008-1, University of Minnesota, Department of Economics, revised 03 2008.
    5. Henk Folmer & Auke Leen, 2013. "Why do successful restaurants not raise their prices?," Letters in Spatial and Resource Sciences, Springer, vol. 6(2), pages 81-90, July.
    6. Ulrich Doraszelski & Sarit Markovich, 2004. "Advertising Dynamics and Competitive Advantage," Computing in Economics and Finance 2004 61, Society for Computational Economics.
    7. repec:ebl:ecbull:v:13:y:2007:i:3:p:1-14 is not listed on IDEAS
    8. Morlacco, Monica & Zeke, David, 2021. "Monetary policy, customer capital, and market power," Journal of Monetary Economics, Elsevier, vol. 121(C), pages 116-134.
    9. Jeffrey Hyde & Brent Gloy, 2007. "Dynamic strategic responses among advertisers: the case of meat products," Economics Bulletin, AccessEcon, vol. 13(3), pages 1-14.
    10. Qi, Shi, 2019. "Advertising, industry innovation, and entry deterrence," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 30-50.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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