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Non-comparative versus Comparative Advertising of Quality

Author

Listed:
  • Winand Emons
  • Claude Fluet

Abstract

Two firms produce a good with a horizontal and a vertical characteristic called quality. The difference in the unobservable quality levels determines how the firms share the market. We consider two scenarios: In the first one, firms disclose quality; in the second one, they send costly signals thereof. Under non-comparative advertising a firm advertises its own quality, under comparative advertising a firm advertises the quality differential. In either scenario, under comparative advertising the firms never advertise together which they may do under non-comparative advertising. Moreover, under comparative advertising firms do not advertise when the informational value to consumers is small.

Suggested Citation

  • Winand Emons & Claude Fluet, 2011. "Non-comparative versus Comparative Advertising of Quality," CIRANO Working Papers 2011s-75, CIRANO.
  • Handle: RePEc:cir:cirwor:2011s-75
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    File URL: http://www.cirano.qc.ca/files/publications/2011s-75.pdf
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    References listed on IDEAS

    as
    1. Fluet, Claude & Garella, Paolo G., 2002. "Advertising and prices as signals of quality in a regime of price rivalry," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 907-930, September.
    2. Francesca Barigozzi & Paolo G. Garella & Martin Peitz, 2009. "With a Little Help from My Enemy: Comparative Advertising as a Signal of Quality," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 1071-1094, December.
    3. Daughety, Andrew F. & Reinganum, Jennifer F., 2007. "Competition and confidentiality: Signaling quality in a duopoly when there is universal private information," Games and Economic Behavior, Elsevier, vol. 58(1), pages 94-120, January.
    4. Simon P. Anderson & Régis Renault, 2009. "Comparative advertising: disclosing horizontal match information," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 558-581.
    5. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    6. Navin Kartik, 2009. "Strategic Communication with Lying Costs," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1359-1395.
    7. Anderson, Simon & Ciliberto, Federico & Liaukonyte, Jura, 2010. "Getting into Your Head(Ache): The Information Content of Advertising in the Over-the-Counter Analgesics Industry," MPRA Paper 24916, University Library of Munich, Germany.
    8. Schultz, Christian, 1999. "Limit pricing when incumbents have conflicting interests," International Journal of Industrial Organization, Elsevier, vol. 17(6), pages 801-825, August.
    9. Mark N. Hertzendorf & Per Baltzer Overgaard, 2001. "Price Competition and Advertising Signals: Signaling by Competing Senders," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(4), pages 621-662, December.
    10. Claude Fluet, 2009. "Accuracy Versus Falsification Costs: The Optimal Amount of Evidence under Different Procedures," Journal of Law, Economics, and Organization, Oxford University Press, vol. 25(1), pages 134-156, May.
    11. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
    12. F. Barigozzi & M. Peitz, 2004. "Comparative Advertising and Competition Policy," Working Papers 524, Dipartimento Scienze Economiche, Universita' di Bologna.
    13. repec:dau:papers:123456789/12478 is not listed on IDEAS
    14. Andrew F. Daughety & Jennifer F. Reinganum, 2008. "Communicating quality: a unified model of disclosure and signalling," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 973-989.
    15. Kim Jeong-Yoo, 2003. "Signal Jamming in Games with Multiple Senders," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 3(1), pages 1-20, November.
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    Citations

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    Cited by:

    1. Rohan Dutta & Sean Horan, 2015. "Inferring Rationales from Choice: Identification for Rational Shortlist Methods," American Economic Journal: Microeconomics, American Economic Association, vol. 7(4), pages 179-201, November.
    2. Archishman Chakraborty & Rick Harbaugh, 2012. "Persuasive Puffery," Working Papers 2012-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    3. repec:bla:randje:v:47:y:2016:i:4:p:1029-1056 is not listed on IDEAS
    4. Simon P. Anderson & Federico Ciliberto & Jura Liaukonyte & Régis Renault, 2016. "Push-me pull-you: comparative advertising in the OTC analgesics industry," RAND Journal of Economics, RAND Corporation, vol. 47(4), pages 1029-1056, November.
    5. Barton, Jared & Castillo, Marco & Petrie, Ragan, 2016. "Negative campaigning, fundraising, and voter turnout: A field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 121(C), pages 99-113.
    6. Alipranti, Maria & Mitrokostas, Evangelos & Petrakis, Emmanuel, 2016. "Non-comparative and comparative advertising in oligopolistic markets," DICE Discussion Papers 231, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    More about this item

    Keywords

    quality; advertising; disclosure; signalling;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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