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Market research and complementary advertising under asymmetric information

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  • Tsuchihashi, Toshihiro

Abstract

We consider whether market research can always increase a seller's sales under bilateral asymmetric information. If a monopoly seller provides a high quality object, market research cannot increase sales even when the cost is sufficiently low. A low quality seller, on the other hand, can likely benefit from market research. However, this research has shown that market research alone does not improve sales and that advertising complements market research. Thus the high quality seller can increase sales by using both methods. The availability of advertising and market research to both types of seller results in disappearance of information asymmetry and efficient trade.

Suggested Citation

  • Tsuchihashi, Toshihiro, 2008. "Market research and complementary advertising under asymmetric information," Discussion Papers 2008-05, Graduate School of Economics, Hitotsubashi University.
  • Handle: RePEc:hit:econdp:2008-05
    Note: April 2008
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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/16948/1/070econDP08-05.pdf
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    1. Moraga-Gonzalez, Jose Luis, 2000. "Quality uncertainty and informative advertising," International Journal of Industrial Organization, Elsevier, vol. 18(4), pages 615-640, May.
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