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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://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
Date of revision:
Handle: RePEc:usg:econwp:2011:17
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  18. Bloch, Francis & Manceau, Delphine, 1999. "Persuasive advertising in Hotelling's model of product differentiation," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 557-574, May.
  19. 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.
  20. Jean J, Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Does Advertising Lower the Price of Newspapers to Consumers ? A Theoretical Appraisal," Working Papers 2004-40, Centre de Recherche en Economie et Statistique.
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  24. 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.
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