Advertising, Consumer Information, and Product Quality
This article analyzes a monopolist's quality and advertising policies and evaluates their social optimality. Our model considers a rational, though not fully informed, consumer who holds prior perceptions about aspects of quality, which determine his purchase pattern. These quality perceptions constitute the product's goodwill. Differences between expected and experienced quality lead to reevaluation of expectations. Monopolists affect these perceptions, and hence build up goodwill, by advertising and quality attribute variations. These affect consumer welfare directly and indirectly by their informational content. We find that advertising may profitably mislead, at least in the short run. Although the welfare effects of a monopolist's quality and advertising policies are not generally determinate, even when information is untrue, we are able to evaluate the welfare determinants of advertising policy from an objective standard and to specify some of the conditions under which advertising is socially excessive.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 10 (1979)
Issue (Month): 2 (Autumn)
|Contact details of provider:|| Web page: http://www.rje.org|
|Order Information:||Web: https://editorialexpress.com/cgi-bin/rje_online.cgi|
When requesting a correction, please mention this item's handle: RePEc:rje:bellje:v:10:y:1979:i:autumn:p:566-588. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.