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Advertising as signal jamming

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  • Grunewald, Andreas
  • Kräkel, Matthias

Abstract

This paper considers a model of informative advertising that allows firms to jam the consumers’ signals on product quality before choosing prices at a second stage. We find that the price competition at the second stage may overrule the basic insights from the signal-jamming approach in other areas of application. As a consequence, a firm may advertise more intensely the higher is the difference of the expected product qualities. Moreover, a firm’s optimal advertising intensity can decrease with quality uncertainty.

Suggested Citation

  • Grunewald, Andreas & Kräkel, Matthias, 2017. "Advertising as signal jamming," International Journal of Industrial Organization, Elsevier, vol. 55(C), pages 91-113.
    • Handle: RePEc:eee:indorg:v:55:y:2017:i:c:p:91-113
    DOI: 10.1016/j.ijindorg.2017.09.003
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    References listed on IDEAS

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    Cited by:

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    2. Martin, Simon & Shelegia, Sandro, 2021. "Underpromise and overdeliver? - Online product reviews and firm pricing," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    3. Niu, Baozhuang & Yue, Haoran & Luo, Huajiang & Shang, Weixin, 2019. "Pricing for newly-launched experience products: Free trial or not?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 126(C), pages 149-176.
    4. Kemal Kıvanç Aköz & Cemal Eren Arbatli & Levent Celik, 2020. "Manipulation Through Biased Product Reviews," Journal of Industrial Economics, Wiley Blackwell, vol. 68(4), pages 591-639, December.
    5. Grunewald, Andreas & Kräkel, Matthias, 2022. "Information manipulation and competition," Games and Economic Behavior, Elsevier, vol. 131(C), pages 245-263.

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    More about this item

    Keywords

    Signal jamming; Informative advertising; Price competition;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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