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Non-comparative versus Comparative Advertising as a Quality Signal

  • Winand Emons
  • Claude Fluet

Two firms produce a product with a horizontal and a vertical characteristic. We call the vertical characteristics quality. The difference in the quality levels determines how the firms share the market. Firms know the quality levels, consumers do not. Under non-comparative advertising a firm may signal its own quality. Under comparative advertising firms may signal the quality differential. In both scenarios the firms may attempt to mislead at a cost. If firms advertise, in both scenarios equilibria are revealing. Under comparative advertising the firms never advertise together which they may do under non-comparative advertising.

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Paper provided by CIRPEE in its series Cahiers de recherche with number 0902.

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Date of creation: 2009
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Handle: RePEc:lvl:lacicr:0902
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  1. Renault, Régis & Anderson, Simon P., 2009. "Comparative advertising: disclosing horizontal match information," Economics Papers from University Paris Dauphine 123456789/12478, Paris Dauphine University.
  2. Claude Fluet & Paolo G. Garella, 1999. "Advertising and Prices as Signals of Quality in a Regime of Price Rivalry," Cahiers de recherche du Département des sciences économiques, UQAM 9903, Université du Québec à Montréal, Département des sciences économiques.
  3. Paul R. Milgrom & John Roberts, 1984. "Price and Advertising Signals of Product Quality," Cowles Foundation Discussion Papers 709, Cowles Foundation for Research in Economics, Yale University.
  4. Christian Schultz, 1997. "Limit Pricing when Incumbents have Conflicting Interests," CIE Discussion Papers 1997-17, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  5. Andrew F. Daughety & Jennifer F. Reinganum, 2004. "Competition and Confidentiality: Signaling Quality in a Duopoly when there is Universal Private Information," Vanderbilt University Department of Economics Working Papers 0417, Vanderbilt University Department of Economics.
  6. Mailath, George J, 1987. "Incentive Compatibility in Signaling Games with a Continuum of Types," Econometrica, Econometric Society, vol. 55(6), pages 1349-65, November.
  7. F. Barigozzi & M. Peitz, 2004. "Comparative Advertising and Competition Policy," Working Papers 524, Dipartimento Scienze Economiche, Universita' di Bologna.
  8. Anderson, Simon & Ciliberto, Federico & Liaukonyte, Jura, 2010. "Getting into Your Head(Ache): The Information Content of Advertising in the Over-the-Counter Analgesics Industry," MPRA Paper 24916, University Library of Munich, Germany.
  9. Claude Fluet, 2009. "Accuracy Versus Falsification Costs: The Optimal Amount of Evidence under Different Procedures," Journal of Law, Economics and Organization, Oxford University Press, vol. 25(1), pages 134-156, May.
  10. Mark N. Hertzendorf & Per Baltzer Overgaard, 2001. "Price Competition and Advertising Signals: Signaling by Competing Senders," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(4), pages 621-662, December.
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