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