Journal ArticleDOI
Informative Advertising with Differentiated Products
Gene M. Grossman,Carl Shapiro +1 more
TLDR
In this article, the role of advertising in improving the matching of products and consumers, and increasing the elasticity of demand faced by each firm, was studied and it was shown that the market-determined levels of advertising are excessive, given the extent of diversity in the market.Abstract:
In this paper we study the role of promotional expenditures by sellers in a model of product differentiation. Advertising conveys full and accurate information about the characteristics of products. Heterogeneous consumers, who have no source of information other than advertisements, seek to purchase the products that best fit their needs. Despite the roles played by advertising in improving the matching of products and consumers, and in increasing the elasticity of demand faced by each firm, we find that the market-determined levels of advertising are excessive, given the extent of diversity in the market. We derive a promotional equilibrium based on a specific information transmission technology, paying explicit attention to the structure of consumer information and its impact on firms' demand curves. This allows us to study the effects of changes in the advertising technology. including an increased ability to target messages to specific groups of consumers, on the equilibrium in the product market. We find that decreased advertising costs may reduce profits by increasing the severity of price competition.read more
Citations
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Journal ArticleDOI
The Theory of Monopolistic Competition.
Journal ArticleDOI
Online Consumer Review: Word-of-Mouth as a New Element of Marketing Communication Mix
Yubo Chen,Jinhong Xie +1 more
TL;DR: In this article, a normative model for online consumer product reviews is developed to address several important strategic issues related to consumer reviews, such as when and how the seller should adjust its own marketing communication strategy in response to online consumer reviews.
Posted Content
The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look
Drew Fudenberg,Jean Tirole +1 more
Journal ArticleDOI
Distance, Lending Relationships and Competition
Hans Degryse,Steven Ongena +1 more
TL;DR: In this paper, the authors study the effect on loan conditions of geographical distance between firms, the lending bank, and all other banks in the vicinity, and report the first comprehensive evidence on the occurrence of spatial price discrimination in bank lending.
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.
References
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Book ChapterDOI
Stability in Competition
TL;DR: In this paper, it was shown that if the purveyor of an article gradually increases his price while his rivals keep theirs fixed, the diminution in volume of his sales will in general take place continuously rather than in the abrupt way which has tacitly been assumed.
Journal ArticleDOI
Monopolistic competition and optimum product diversity
Avinash Dixit,Joseph E. Stiglitz +1 more
TL;DR: In this article, Pettengill tests whether there is an excessive number of firms in a monopolistically competitive equilibrium by a device of considerable expository merit, and redistributes the resources thus released equally over the remaining firms in the sector, to see if welfare can be improved.
Journal ArticleDOI
Monopolistic competition with outside goods
TL;DR: In this article, a model of spatial competition in which a second commodity is explicitly treated is presented, and it is shown that a zero-profit equilibrium with symmetrically located firms may exhibit rather strange properties.
Journal ArticleDOI