The influence of media attention on retail price competition

Media price comparisons influence how firms set their prices. While it is commonly accepted that more informed consumers tend to drive prices lower, we identify an `intertemporal advertising effect,' where firms leverage their success in price comparisons to boost future demand. When a greater proportion of consumers relies on these comparisons to guide their future purchasing decisions, rather than directly comparing prices themselves, firms may be incentivized to set lower prices to `win' the comparison. This challenges the conventional understanding of how consumer information affects pricing. However, frequent comparisons reduce the impact of individual wins, and the unpredictable timing of these comparisons limits firms' ability to strategically adjust their prices.