Non-Comparative Versus Comparative Advertising as a Quality Signal

30 Pages Posted: 18 Feb 2009

See all articles by Winand Emons

Winand Emons

University of Bern - Department of Economics; Centre for Economic Policy Research (CEPR)

Claude Fluet

Université Laval

Date Written: January 2009

Abstract

Two firms produce a product with a horizontal and a vertical characteristic. We call the vertical characteristic quality. The difference in the quality levels determines how the firms share the market. Firms know the quality levels, consumers do not. Under non-comparative advertising a firm may signal its own quality. Under comparative advertising firms may signal the quality differential. In both scenarios the firms may attempt to mislead at a cost. If firms advertise, in both scenarios equilibria are revealing. Under comparative advertising the firms never advertise together which they may do under non-comparative advertising.

Keywords: advertising, costly state falsification, signalling

JEL Classification: D82, K41, K42

Suggested Citation

Emons, Winand and Fluet, Claude-Denys, Non-Comparative Versus Comparative Advertising as a Quality Signal (January 2009). CEPR Discussion Paper No. DP7109, Available at SSRN: https://ssrn.com/abstract=1345635

Winand Emons (Contact Author)

University of Bern - Department of Economics ( email )

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HOME PAGE: http://staff.vwi.unibe.ch/emons

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Claude-Denys Fluet

Université Laval ( email )

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Quebec, Quebec G1K 7P4
Canada
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