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Comparative advertising: disclosing horizontal match information

  • Renault, Régis
  • Anderson, Simon P.

Improved consumer information about horizontal aspects of products of similar quality leads to better consumer matching but also to higher prices, so consumer surplus can go up or down, while profits rise. With enough quality asymmetry, though, the higher-quality (and hence larger) firm's price falls with more information, so both effects benefit consumers. This occurs when comparative advertising is used against a large firm by a small one. Comparative advertising, as it imparts more information, therefore helps consumers. Although it also improves the profitability of the small firm, overall welfare goes down because of the large loss to the attacked firm.

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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/12478.

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Date of creation: 2009
Date of revision:
Publication status: Published in RAND Journal of Economics, 2009, Vol. 40, no. 3. pp. 558-581.Length: 23 pages
Handle: RePEc:dau:papers:123456789/12478
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