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Persuading Consumers With Social Attitudes

  • Bühler, Stefan

    ()

  • Halbheer, Daniel

    ()

This paper analyzes persuasive advertising and pricing in oligopoly if firms sell differentiated products and consumers have heterogenous social attitudes towards the consumption by others. Deriving product demand from primitives, we show that the demand-enhancing effect of persuasive advertising varies across consumers and increases in the average degree of conformity. In equilibrium, both quality and cost leaders choose higher advertising intensities and charge higher prices than their competitors. In addition, we show that an increase in the average degree of conformity among consumers reinforces asymmetries between firms.

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File URL: http://www1.vwa.unisg.ch/RePEc/usg/econwp/EWP-1117.pdf
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Paper provided by University of St. Gallen, School of Economics and Political Science in its series Economics Working Paper Series with number 1117.

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Length: 24 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:usg:econwp:2011:17
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  17. Stefan Bühler & Daniel Halbheer, 2010. "Selling When Brand Image Matters," University of St. Gallen Department of Economics working paper series 2010 2010-14, Department of Economics, University of St. Gallen.
  18. Nitin Mehta & Xinlei (Jack) Chen & Om Narasimhan, 2008. "Informing, Transforming, and Persuading: Disentangling the Multiple Effects of Advertising on Brand Choice Decisions," Marketing Science, INFORMS, vol. 27(3), pages 334-355, 05-06.
  19. Athey, Susan & Schmutzler, Armin, 2001. "Investment and Market Dominance," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 1-26, Spring.
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