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With a little help from my enemy: comparative advertising as a signal of quality

Listed author(s):
  • Francesca BARIGOZZI

    ()

  • Paolo Giorgio GARELLA

    ()

  • Martin PEITZ

    ()

We extend the theory of advertising as a quality signal, using a model where an entrant can choose to advertise by comparing its product to that of an established incumbent. Comparative advertising, comparing quality of one’s own product to that of a rival’s, empowers the latter to file for court intervention if it believes the comparison to be false or misleading. We show that comparative advertising can be a signal in instances where generic advertising is not viable.

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File URL: http://wp.demm.unimi.it/files/wp/2008/DEMM-2008_031wp.pdf
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Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2008-31.

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Date of creation: 16 Oct 2008
Handle: RePEc:mil:wpdepa:2008-31
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  1. Kyle Bagwell & Garey Ramey, 1988. "Advertising and Limit Pricing," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 59-71, Spring.
  2. Meurer, Michael & Stahl, Dale II, 1994. "Informative advertising and product match," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 1-19, March.
  3. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
  4. Steven A Matthews & Doron Fertig, 1990. "Advertising Signals of Product Quality," Discussion Papers 881, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Kohlberg, Elon & Mertens, Jean-Francois, 1986. "On the Strategic Stability of Equilibria," Econometrica, Econometric Society, vol. 54(5), pages 1003-1037, September.
  6. Kihlstrom, Richard E & Riordan, Michael H, 1984. "Advertising as a Signal," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 427-450, June.
  7. Paolo G. Garella & Martin Peitz, 2000. "Intermediation Can Replace Certification," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(1), pages 1-24, 03.
  8. Laurent Linnemer, 1998. "Entry Deterrence, Product Quality: Price and Advertising as Signals," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(4), pages 615-645, December.
  9. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
  10. Pechmann, Cornelia & Ratneshwar, S, 1991. " The Use of Comparative Advertising for Brand Positioning: Association versus Differentiation," Journal of Consumer Research, Oxford University Press, vol. 18(2), pages 145-160, September.
  11. Shiou Shieh, 1996. "Price and Money-Back Guarantees as Signals of Product Quality," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(3), pages 361-377, 09.
  12. Bagwell, Kyle & Ramey, Garey, 1990. "Advertising and pricing to deter or accommodate entry when demand is unknown," International Journal of Industrial Organization, Elsevier, vol. 8(1), pages 93-113.
  13. Sridhar Moorthy & Kannan Srinivasan, 1995. "Signaling Quality with a Money-Back Guarantee: The Role of Transaction Costs," Marketing Science, INFORMS, vol. 14(4), pages 442-466.
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