Advertising and Coordination
Kyle Bagwell,Garey Ramey +1 more
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In this article, the authors provide a theoretical explanation for Benham's empirical association of the ability to advertise with lower prices and larger scale, and show that advertising becomes necessary for optimal coordination when the identity of the efficient firm is uncertain.Abstract:
When market information such as price is difficult to communicate, consumers and firms may be unable to take advantage of mutually beneficial scale economies, so that coordination failures arise. Ostensibly uninformative advertising expenditures can be used to eliminate coordination failures, by allowing an efficient firm to communicate implicitly that it offers a low price. This provides a theoretical explanation for Benham's (1972) empirical association of the ability to advertise with lower prices and larger scale. Advertising becomes necessary for optimal coordination when the identity of the efficient firm is uncertain. An application to loss-leader pricing is developed.read more
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Posted ContentDOI
The economic analysis of advertising
TL;DR: A comprehensive survey of the economic analysis of advertising can be found in this article, with a focus on positive and normative theories of monopoly advertising, price and non-price advertising, theories of advertising and product quality, and theories that explore the potential role for advertising in deterring entry.
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Advertising, Breadth of Ownership, and Liquidity
TL;DR: In this article, the authors provide empirical evidence that a firm's overall visibility with investors, as measured by its product market advertising, has important consequences for the stock market and show that firms with greater advertising expenditures, ceteris paribus, have a larger number of both individual and institutional investors, and better liquidity of their common stock.
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Promotional Reviews: An Empirical Investigation of Online Review Manipulation†
TL;DR: This article examined the differences in reviews for a given hotel between two sites: Expedia.com (only a customer can post a review) and TripAdvisor (anyone can post) and showed that the net gains from promotional reviewing are highest for independent hotels with single-unit owners and lowest for branded chain hotels with multiunit owners.
Journal ArticleDOI
Promotional Reviews: An Empirical Investigation of Online Review Manipulation
TL;DR: In this article, the authors examine hotel reviews, exploiting the organizational differences between two travel websites: Expedia.com and Tripadvisor.com, and show that hotels with a high incentive to fake have a greater share of five-star (positive) reviews on TripAdvisor relative to Expedia, and that the hotel neighbors of hotels with high incentives to fake had more one and two star (negative) reviews compared to the non-faking hotels.
Book ChapterDOI
Chapter 28 The Economic Analysis of Advertising
TL;DR: A comprehensive survey of the economic analysis of advertising can be found in this article, with a focus on positive and normative theories of monopoly advertising, price and non-price advertising, theories of advertising and product quality, and theories that explore the potential role for advertising in deterring entry.
References
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Technology Adoption in the Presence of Network Externalities
Michael L. Katz,Carl Shapiro +1 more
TL;DR: In this article, the authors analyze the adoption pattern of technologies in industries where network externalities are significant and find that the pattern of adoption depends on whether technologies are sponsored by an entity that has property rights to the technology and is willing to make investments to promote it.
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Joseph Farrell,Garth Saloner +1 more
TL;DR: In this article, the authors examine whether standardization benefits can trap an industry in an obsolete or inferior standard when there is a better alternative available, and discuss the extent to which the problem can be overcome by communication.
Journal ArticleDOI
Price and Advertising Signals of Product Quality
Paul Milgrom,John Roberts +1 more
TL;DR: This paper presented a signaling model based on the ideas of Phillip Nelson, in which both the introductory price and the level of directly "uninformative" advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in their model.
Journal ArticleDOI
Aggregate Demand Management in Search Equilibrium
TL;DR: In this article, a simple barter model with identical risk-neutral agents where trade is coordinated by a stochastic matching process is analyzed for a simple single-agent setting, and it is shown that there are multiple steady-state rational expectations equilibria, with all non-corner solution equilibrium inefficient.
Journal ArticleDOI
Coordinating Coordination Failures in Keynesian Models
Russell Cooper,Andrew John +1 more
TL;DR: In this paper, the importance of strategic complementarities in agents' payoff functions as a basis for macroeconomic coordination failures is discussed, where the optimal strategy of an agent depends positively upon the strategies of the other agents.