On The Competitive Effect Of Informative Advertising
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On The Competitive Effect Of Informative Advertising
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Author : Kurt R. Brekke
language : en
Publisher:
Release Date : 2009
On The Competitive Effect Of Informative Advertising written by Kurt R. Brekke and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
Informative Advertising
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Author : David Soberman
language : en
Publisher:
Release Date : 2003
Informative Advertising written by David Soberman and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.
Our objective is to broaden the current understanding of how horizontal differentiation interacts with both advertising and pricing by extending the analysis of Grossman and Shapiro (1984) to look at a full range of differentiation conditions. We seek to offer a useful perspective on the relationship between advertising and pricing by focusing attention on competitors whose essential difference prior to advertising and price decisions is product differentiation. We construct a model where demand for a firm's products is driven by three factors: consumers' awareness of products and their attributes, pricing, and the degree of fit between a product's attributes and the needs of the consumer. Following Salop (1979), differentiation is captured by representing the firms as equally spaced points in a unitary circular spatial market. We assume that product attributes are fixed and the firms make decisions about how much to advertise and what prices to set for their products. A distinct element of the model is the mechanism by which advertising makes consumers aware of products. Similar to Grossman and Shapiro (1985), advertising is represented as a series of messages received randomly by consumers in the market and consumers only have interest in a product if they have seen advertising about it. It is important to underline that advertising only affects consumers' awareness of a product and not their valuation of it. In addition, the probability of a consumer seeing a firm's advertising is independent of the consumer's location. The primary finding of our analysis is that the impact of informative advertising on market prices and profits is a function of the pre-existing level of differentiation in the market. Advertising is observed to create distinct groups of consumers based on the advertising to which they have been exposed. The optimal pricing is a function of competing firms balancing the needs of each of the groups that have interest in their products. When the level of differentiation between products is high, increases in advertising have no effect on observed prices. However, when the level of differentiation between products is moderate, increases in advertising tend to drive up prices. Finally, when the level of differentiation is low, we show that higher advertising leads to lower prices and profits. We also find that total welfare can increase when higher advertising leads to higher prices. This highlights the risk of reaching conclusions about the anti-competitive effects of high advertising based solely on an observed relationship between advertising and pricing. In a modified version of the model, we assume that the probability of a consumer seeing a firm's advertising depends on that consumer's location. More specifically, we consider situations in which firms can target heavier advertising to a) customers that are locationally close to them or b) customers that are locationally distant from them. This captures the notion of two different types of markets, one in which firms aggressively pursue the competitor's customers and the other in which firms focus their effort on loyal customers. We find that the targeting of advertising does affect the relationship between advertising and pricing. While the general pattern of results regarding the impact of differentiation on the advertising/price relationship is consistent across the three conditions examined, targeting has a particularly interesting effect in conditions of moderate differentiation. In fact, when distant consumers are targeted, the positive relationship observed with no targeting is reversed and prices fall with higher levels of advertising. However, the most interesting effect of targeted advertising is its effect on overall pricing. In conditions of low differentiation, targeting consumers who are nearby exacerbates price competition and reduces price below the no-targeting price. On the other hand, targeting consumers who are distant results in equilibrium prices that are higher than the no-targeting price. Exactly the opposite is observed when differentiation is moderate. These findings underline the importance of existing differentiation between firms for determining the effect that targeted advertising has on pricing. They also provide a potential explanation for offensive or defensive postures that firms employ in media buying that has not been considered previously.
Informative Advertising
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Author : D. A. Soberman
language : en
Publisher:
Release Date : 2000
Informative Advertising written by D. A. Soberman and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Advertising categories.
Informative Advertising In Monopolistically Competitive Markets
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Author : Anthony Creane
language : en
Publisher:
Release Date : 2019
Informative Advertising In Monopolistically Competitive Markets written by Anthony Creane and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
In their seminal paper Grossman and Shapiro (1984) find that informative advertising is socially excessive in an oligopoly (entry is also socially excessive). However, to derive the results, it was assumed that all consumers receive at least one ad, i.e., advertising does not have a demand creation effect. Christou and Vettas (2008), Tirole (1988), among others, have presented counter-examples in alternative settings, showing when the assumption does not hold, advertising may socially advertising. Christou and Vettas (2008) also show that quasiconcavity may not hold and present examples in which the equilibrium does not exist as firms would deviate to a higher price. We revisit the question by modeling firms (like consumers) as a continuum, which eliminates the discontinuity that bedeviled both papers and allows us to not use the assumption that all consumers receive at least one ad. As a result, we are able to derive explicit and intuitive conditions for an equilibrium. More importantly, we find instead advertising is socially insufficient regardless of the fraction of the consumers who receive an ad, including when there is effectively no demand creation. We also find that there is insufficient entry instead of excess entry. We provide intuition for the difference between our and previous results, which partly turns on firms deviating to a lower (supercompetitive) price.
Advertising And The Marketplace
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Author : Pepall, Lynne
language : en
Publisher: Edward Elgar Publishing
Release Date : 2021-07-31
Advertising And The Marketplace written by Pepall, Lynne and has been published by Edward Elgar Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-07-31 with Business & Economics categories.
This accessible and comprehensive textbook explores the role of advertising in the marketplace. It investigates how firms’ advertising strategies are informative, persuasive or add value to the product advertised. The book explains in detail empirical methodologies used to identify the impact of advertising on consumer demand and on market structure and reviews some recent empirical findings. It concludes with an in-depth exploration of digital advertising and auctions along with a framework for current antitrust investigations into two-sided platforms (Google, Facebook) that are funded by advertising revenues.
Informative Advertising With Differentiated Products
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Author : Gene M. Grossman
language : en
Publisher:
Release Date : 1982
Informative Advertising With Differentiated Products written by Gene M. Grossman and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1982 with Advertising categories.
The Effect Of Advertising On Competition In The Soft Drink Industry
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Author : Debra Sue Warady
language : en
Publisher:
Release Date : 1990
The Effect Of Advertising On Competition In The Soft Drink Industry written by Debra Sue Warady and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1990 with categories.
Measuring The Effect Of Advertising
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Author : David R. Corkindale
language : en
Publisher: Lexington Books
Release Date : 1975
Measuring The Effect Of Advertising written by David R. Corkindale and has been published by Lexington Books this book supported file pdf, txt, epub, kindle and other format this book has been release on 1975 with Business & Economics categories.
When Ads Work
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Author : David M Jones
language : en
Publisher: Routledge
Release Date : 2015-03-26
When Ads Work written by David M Jones and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-03-26 with Business & Economics categories.
The "accepted wisdom" in advertising is that ad campaigns are good for building brand recognition and good will, but not for immediate sales impact. "When Ads Work" argues the opposite - that well-planned and well-executed advertising campaigns can and should have an immediate impact on sales. Featuring numerous examples from recent ad campaigns, the new edition of this popular book is a model for any successful advertising research program. With a device he calls STAS (Short Term Advertising Strength) - a measure of the immediate effect of advertising on sales - the author demonstrates that the strongest ad campaigns can triple sales, while the weakest campaigns can actually cause sales to fall by more than 50 percent. He exposes sales promotions as wasteful, especially when they are unsupported by advertising, and also demonstrates the strong synergy that can operate between advertising and promotion when they are planned and executed in an integrated fashion. "When Ads Work" offers eye-opening research and practical information that no one who studies advertising or spends advertising dollars can afford to ignore.
Industrial Organization
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Author : Paul Belleflamme
language : en
Publisher: Cambridge University Press
Release Date : 2015-08-13
Industrial Organization written by Paul Belleflamme and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-08-13 with Business & Economics categories.
Updated according to classroom feedback, this comprehensive textbook blends theory and formal models with real-world applications and take-away lessons.