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Dissipative advertising signals quality: Static model with a continuum of types

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  • Linnemer, Laurent

Abstract

Advertising and price have been shown to signal product quality. Most works limit the number of types to high and low quality. I characterize the optimal separating marketing strategy when both quality and marginal cost are uncertain and continuous variables.

Suggested Citation

  • Linnemer, Laurent, 2012. "Dissipative advertising signals quality: Static model with a continuum of types," Economics Letters, Elsevier, vol. 114(2), pages 150-153.
  • Handle: RePEc:eee:ecolet:v:114:y:2012:i:2:p:150-153
    DOI: 10.1016/j.econlet.2011.10.011
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    References listed on IDEAS

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    1. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    2. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
    3. Thomas, Louis & Shane, Scott & Weigelt, Keith, 1998. "An empirical examination of advertising as a signal of product quality," Journal of Economic Behavior & Organization, Elsevier, vol. 37(4), pages 415-430, December.
    4. Wilson, Robert, 1985. "Multi-dimensional signalling," Economics Letters, Elsevier, vol. 19(1), pages 17-21.
    5. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
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    Cited by:

    1. Nicolás Figueroa & Carla Guadalupi, 2017. "Convincing early adopters: Price signals and Information transmission," Documentos de Trabajo 486, Instituto de Economia. Pontificia Universidad Católica de Chile..
    2. repec:eee:indorg:v:55:y:2017:i:c:p:91-113 is not listed on IDEAS

    More about this item

    Keywords

    Quality; Signaling; Dissipative advertising;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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