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Persuading Consumers With Social Attitudes

Listed author(s):
  • 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://ux-tauri.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
Handle: RePEc:usg:econwp:2011:17
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  6. Farrell, Joseph & Klemperer, Paul, 2006. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Competition Policy Center, Working Paper Series qt9n26k7v1, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  7. Julio J. Rotemberg, 2010. "Persuasion and empathy in salesperson-customer interactions," NBER Working Papers 15975, National Bureau of Economic Research, Inc.
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  17. Athey, Susan & Schmutzler, Armin, 2001. "Investment and Market Dominance," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 1-26, Spring.
  18. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
  19. David P. Myatt & Justin P. Johnson, 2004. "On the Simple Economics of Advertising, Marketing, and Product Design," Economics Series Working Papers 185, University of Oxford, Department of Economics.
  20. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
  21. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
  22. Bibek Banerjee & Subir Bandyopadhyay, 2003. "Advertising Competition Under Consumer Inertia," Marketing Science, INFORMS, vol. 22(1), pages 131-144, January.
  23. Clark, Andrew E. & Oswald, Andrew J., 1998. "Comparison-concave utility and following behaviour in social and economic settings," Journal of Public Economics, Elsevier, vol. 70(1), pages 133-155, October.
  24. 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.
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