Advertising and Coordination
Kyle Bagwell,Garey Ramey +1 more
TLDR
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
Citations
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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.
Journal ArticleDOI
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.
Journal ArticleDOI
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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Journal ArticleDOI
Pricing and coordination: Strategically stable equilibria
Jacob Glazer,Andrew Weiss +1 more
TL;DR: In this article, a class of two-period games with the first-period interactions have the features of a prisoner's dilemma game, and the second-period interaction has the feature of a coordination game is investigated.
Posted Content
Advertising and Coordination
Kyle Bagwell,Garey Ramey +1 more
TL;DR: The authors show that when relevant market information such as price is difficult to communicate, advertising plays a key role in bringing about optimal coordination of purchase behavior: an efficient firm uses advertising expenditures in place of price to inform sophisticated consumers that it offers a better deal.