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Persuasive Advertising and Product Differentiation

Author

Listed:
  • Von der Fehr, N.H.M.
  • Stevik, K.

Abstract

In a Hotelling-type differentiated-products duopoly model we distinguish between three alternative ways that persuasive advertising may affect consumer perferences. We illustrate the implications of our theory - an contrast with results from models of informative advertising - by analysing the relationship between the degree of product differentiation and equilibrium levels of advertising. The analysis suggests that an positive relationship between equilibrium levels of advertising and (inherent) product substitutability is consistent only with advertising that 'increases perceived product differences'.

Suggested Citation

  • Von der Fehr, N.H.M. & Stevik, K., 1996. "Persuasive Advertising and Product Differentiation," Memorandum 1996_001, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:1996_001
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    Cited by:

    1. Yan, Yingchen & Zhao, Qiuhong & Qin, Zhongfeng & Sun, Gaoji, 2022. "Integration of development and advertising strategies for multi-attribute products under competition," European Journal of Operational Research, Elsevier, vol. 300(2), pages 490-503.
    2. Andrea Mantovani & Giordano Mion, 2006. "Advertising and endogenous exit in a differentiated duopoly," Recherches économiques de Louvain, De Boeck Université, vol. 72(1), pages 19-48.
    3. Victor Tremblay & Stephen Polasky, 2002. "Advertising with Subjective Horizontal and Vertical Product Differentiation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(3), pages 253-265, May.
    4. Buehler, Stefan & Halbheer, Daniel, 2012. "Persuading consumers with social attitudes," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 439-450.
    5. Uwe Dulleck & Paul Frijters & Konrad Podczeck, 2006. "All-pay Auctions with Budget Constraints and Fair Insurance," Vienna Economics Papers vie0605, University of Vienna, Department of Economics.
    6. Angelo Corallo & Maria Elena Latino & Biagio Nuzzo & Fabrizio Striani, 2025. "Advertising increases demand for the equivalent drugs: a theoretical model," SN Business & Economics, Springer, vol. 5(5), pages 1-19, May.
    7. Yuxiang Zhang & Weijun Zhong, 2024. "“Anchoring Effect†of Privacy in Targeted Persuasive Advertising Competition," SAGE Open, , vol. 14(2), pages 21582440241, June.
    8. Lei Yan & Yuxiang Zhang & Shue Mei & Weijun Zhong, 2024. "Personalized pricing with persuasive advertising and the value of consumer information: a duopoly framework," Electronic Commerce Research, Springer, vol. 24(3), pages 1533-1562, September.
    9. Young Hou & Dennis Yao, 2022. "Pushed into a crowd: Repositioning costs, resources, and competition in the RTE cereal industry," Strategic Management Journal, Wiley Blackwell, vol. 43(1), pages 3-29, January.
    10. Degryse, Hans & Irmen, Andreas, 2001. "Attribute dependence and the provision of quality," Regional Science and Urban Economics, Elsevier, vol. 31(5), pages 547-569, September.
    11. de Frutos, Maria-Angeles & Ornaghi, Carmine & Siotis, Georges, 2013. "Competition in the pharmaceutical industry: How do quality differences shape advertising strategies?," Journal of Health Economics, Elsevier, vol. 32(1), pages 268-285.
    12. Uwe Dulleck & Paul Frijters & Konrad Podczeck, 2006. "All-pay auctions with budget constraints and fair insurance," Economics working papers 2006-13, Department of Economics, Johannes Kepler University Linz, Austria.

    More about this item

    Keywords

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    JEL classification:

    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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