Uninformative Advertising as an Invitation to Search
What the firm should say in an advertising message, the choice of content , is a critical managerial decision. Here, we focus on a particular aspect of the advertising content choice: an attribute-focused appeal versus an appeal with no direct information on product attributes. We make two assumptions that capture the reality of the advertising context. First, we assume that the bandwidth of advertising is limited: a firm can only communicate about a limited number of attributes. Second, we assume that consumers are active: they can choose to engage in a costly search to obtain additional product-related information. In this setting, we show that there exists an equilibrium where the high-quality firm chooses to produce messages devoid of any attribute information in order to invite the consumer to engage in search, which is likely to uncover positive information about the product. Whereas most of the previous literature has focused on the decision to advertise as a signal of quality, we show that message content, coupled with consumer search, can also serve as a credible signal of quality. In an extension, we show that our results are robust to endogenizing the firm's decision on the amount of advertising spending.
Volume (Year): 30 (2011)
Issue (Month): 4 (July)
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