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Dynamic informative advertising of new experience goods:

  • Saak, Alexander E.

This paper analyzes the optimal advertising and price policies of a monopolist who sells a new experience good over time to a population of heterogeneous forward-looking buyers. We consider informative advertising that can complement or substitute for learning-by-purchasing, and show that the advertising intensity always peaks during the early stages when the price extracts surplus from the buyers who are yet to learn their valuation for the good. We also show that even though informative advertising may temporarily raise prices and slow down the learning process, an advertising ban can reduce welfare.

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Paper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 1062.

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Date of creation: 2011
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Handle: RePEc:fpr:ifprid:1062
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  1. Alexander E. Saak, 2008. "THE VALUE OF PRIVATE INFORMATION IN MONOPOLY -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(1), pages 169-189, 03.
  2. Lewis, Tracy R & Sappington, David E M, 1994. "Supplying Information to Facilitate Price Discrimination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 309-27, May.
  3. Renault, Régis & Liaukonyte, Jura & Ciliberto, Federico & Anderson, Simon, 2012. "Push-Me Pull-You: Comparative Advertising in the OTC Analgesics Industry," Economics Papers from University Paris Dauphine 123456789/12285, Paris Dauphine University.
  4. Simon P. Anderson & R�gis Renault, 2006. "Advertising Content," American Economic Review, American Economic Association, vol. 96(1), pages 93-113, March.
  5. Kapil Bawa & Robert Shoemaker, 2004. "The Effects of Free Sample Promotions on Incremental Brand Sales," Marketing Science, INFORMS, vol. 23(3), pages 345-363, November.
  6. Tülin Erdem & Michael P. Keane, 1996. "Decision-Making Under Uncertainty: Capturing Dynamic Brand Choice Processes in Turbulent Consumer Goods Markets," Marketing Science, INFORMS, vol. 15(1), pages 1-20.
  7. Amir Heiman & Bruce McWilliams & Zhihua Shen & David Zilberman, 2001. "Learning and Forgetting: Modeling Optimal Product Sampling Over Time," Management Science, INFORMS, vol. 47(4), pages 532-546, April.
  8. David P. Myatt & Justin P. Johnson, 2004. "On the Simple Economics of Advertising, Marketing, and Product Design," Economics Series Working Papers 185, University of Oxford, Department of Economics.
  9. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
  10. Grossman, Gene M & Shapiro, Carl, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Wiley Blackwell, vol. 51(1), pages 63-81, January.
  11. Dirk Bergemann & Juuso Välimäki, 2006. "Dynamic Pricing of New Experience Goods," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 713-743, August.
  12. Simon P. Anderson & Régis Renault, 2006. "comparative Advertising," THEMA Working Papers 2006-18, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
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