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The advertising mix for a search good

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  • Anderson, Simon P
  • Renault, Régis

Abstract

We extend the persuasion game to bring it squarely into the economics of advertising. We model advertising as exciting consumer interest into learning more about the product, and determine a firm's equilibrium choice of advertising content over quality information, price information, and horizontal match information. Equilibrium is unique whenever advertising is necessary. The outcome is a separating equilibrium with quality unravelling. Lower quality firms need to provide more information. For a given quality level, as a function of consumer visit costs, first quality information is disclosed, then price information and then horizontal product information are added to the advertising mix. Some suggestive evidence is provided from airline ads in newspapers.

Suggested Citation

  • Anderson, Simon P & Renault, Régis, 2012. "The advertising mix for a search good," CEPR Discussion Papers 8756, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8756
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    References listed on IDEAS

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    Cited by:

    1. Levent Celik, 2014. "Information Unraveling Revisited: Disclosure of Horizontal Attributes," Journal of Industrial Economics, Wiley Blackwell, vol. 62(1), pages 113-136, March.
    2. Roberto Burguet & Vaiva Petrikaite, 2017. "Targeted Advertising and Costly Consumer Search," Working Papers 971, Barcelona Graduate School of Economics.
    3. Florian Morath & Johannes Muenster, 2014. "Online Shopping and Platform Design with Ex Ante Registration Requirements," Working Papers tax-mpg-rps-2014-21, Max Planck Institute for Tax Law and Public Finance.

    More about this item

    Keywords

    advertising; content analysis; information; persuasion game; search;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • 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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