Assisted Self-Persuasion: Advertising with Consumer Adjustment to Choice
I develop a new theory of persuasive advertising in which consumers rationally adjust to (i.e., improve their attitude toward) the products they choose and advertising facilitates adjustment. Advertisings price effects depend on whether marginal or inframarginal consumers are most heavily targeted, consistent with the literature. But they also depend on advertisings role as an overall adjustment intensifier, whence variation in the cost of adjustment with the strength of the consumers initial product preference determines the equilibrium price level. Whether too much or too little advertising is provided in equilibrium depends on the sign and size of advertisings price effect, the relative density of marginal consumers, and the relative extent to which advertisings adjustment cost reductions benefit marginal consumers.
|Date of creation:||09 Mar 2017|
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- Bloch, Francis & Manceau, Delphine, 1999. "Persuasive advertising in Hotelling's model of product differentiation," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 557-574, May.
- Xavier Gabaix & David Laibson, 2006.
"Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 121(2), pages 505-540.
- Xavier Gabaix & David Laibson, 2005. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," NBER Working Papers 11755, National Bureau of Economic Research, Inc.
- Laibson, David I. & Gabaix, Xavier, 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," Scholarly Articles 4554333, Harvard University Department of Economics.
- Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
- Andrew Caplin & Barry Nalebuff, 1990. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Cowles Foundation Discussion Papers 937, Cowles Foundation for Research in Economics, Yale University.
- Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
- Barbara J. Phillips & Edward F. McQuarrie, 2010. "Narrative and Persuasion in Fashion Advertising," Journal of Consumer Research, Oxford University Press, vol. 37(3), pages 368-392, October. Full references (including those not matched with items on IDEAS)
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