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

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  • Francesca BARIGOZZI
  • Paolo Giorgio GARELLA
  • Martin PEITZ

Abstract

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.

Suggested Citation

  • Francesca BARIGOZZI & Paolo Giorgio GARELLA & Martin PEITZ, 2008. "With a little help from my enemy: comparative advertising as a signal of quality," Departmental Working Papers 2008-31, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    • Handle: RePEc:mil:wpdepa:2008-31
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    References listed on IDEAS

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    Cited by:

    1. Emons, Winand & Fluet, Claude, 2012. "Non-comparative versus comparative advertising of quality," International Journal of Industrial Organization, Elsevier, vol. 30(4), pages 352-360.
    2. Baumann, Florian & Rasch, Alexander, 2017. "Injunctions against false advertising," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168142, Verein für Socialpolitik / German Economic Association.
    3. Salvatore Piccolo & Piero Tedeschi & Giovanni Ursino, 2015. "How limiting deceptive practices harms consumers," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 611-624, September.
    4. Giri, B.C. & Sharma, S., 2014. "Manufacturer's pricing strategy in a two-level supply chain with competing retailers and advertising cost dependent demand," Economic Modelling, Elsevier, vol. 38(C), pages 102-111.
    5. Viscolani, Bruno, 2012. "Pure-strategy Nash equilibria in an advertising game with interference," European Journal of Operational Research, Elsevier, vol. 216(3), pages 605-612.
    6. Barton, Jared & Castillo, Marco & Petrie, Ragan, 2016. "Negative campaigning, fundraising, and voter turnout: A field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 121(C), pages 99-113.
    7. Cao, Sean Shun & Fang, Vivian W. & (Gillian) Lei, Lijun, 2021. "Negative peer disclosure," Journal of Financial Economics, Elsevier, vol. 140(3), pages 815-837.

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    More about this item

    Keywords

    Advertising; Quality; signaling; Entry; Competition;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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