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Generic Advertising in an Asymmetric Cournot Oligopoly

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  • Yuqing Zheng
  • Talia Bar
  • Harry M. Kaiser

Abstract

We examine how benefits of mandated generic advertising vary with firm size in an asymmetric Cournot oligopoly market. Generic advertising, funded through a mandatory assessment, changes demand but also increases firms' costs. The effect on a firm's profits depends upon the nature of the change in demand and the company's market share. Situations are identified in which generic advertising: (1) disproportionately favors large (small) firms; (2) decreases profits; and (3) increases (decreases) social welfare. Our findings explain the concerns that are often raised on small firms being disadvantaged by generic advertising. We discuss implications for policy and for firms' advertising strategies. Copyright 2010, Oxford University Press.

Suggested Citation

  • Yuqing Zheng & Talia Bar & Harry M. Kaiser, 2010. "Generic Advertising in an Asymmetric Cournot Oligopoly," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 740-754.
    • Handle: RePEc:oup:ajagec:v:92:y:2010:i:3:p:740-754
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    File URL: http://hdl.handle.net/10.1093/ajae/aap032
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    Cited by:

    1. Jinji, Naoto, 2014. "Comparative statics for oligopoly: A generalized result," Economics Letters, Elsevier, vol. 124(1), pages 79-82.
    2. Ricardo Sellers†Rubio & Francisco Mas†Ruiz & Franco Sancho†Esper, 2018. "Firm reputation, advertising investment, and price premium: The role of collective brand membership in high†quality wines," Agribusiness, John Wiley & Sons, Ltd., vol. 34(2), pages 351-362, March.
    3. Kassas, Bachir & Palma, Marco A. & Hall, Charles R., 2020. "Informing Generic Advertising Programs by Investigating Income and Relative Return Heterogeneities in Voluntary Contributions Mechanisms," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 46(2), August.

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