Generic Advertising in an Asymmetric Cournot Oligopoly

American Journal of Agricultural Economics, Forthcoming

35 Pages Posted: 5 Nov 2009

See all articles by Yuqing Zheng

Yuqing Zheng

University of Kentucky - College of Agriculture - Department of Agricultural Economics

Talia Bar

University of Connecticut - Department of Economics

Harry M. Kaiser

Cornell University - School of Applied Economics and Management

Date Written: November 4, 2009

Abstract

We examine how benefits of mandated generic advertising vary with firm size in an asymmetric Cournot oligopoly market. Generic advertising, funded through a mandatory assessment, changes demand but also increases firms’ costs. The effect on firm’s profits depends upon the nature of the change in demand and the company’s market share. Situations are identified in which generic advertising: (1) disproportionately favors large (small) firms, (2) decreases profits, and (3) increases (decreases) social welfare. Our findings explain the concerns that are often raised on small firms being disadvantaged by generic advertising. We discuss implications for policy and for firms’ advertising strategies.

Keywords: Cournot, demand rotation, demand shift, disproportionately, firm size, generic advertising, welfare

JEL Classification: L13, M30

Suggested Citation

Zheng, Yuqing and Bar, Talia R. and Kaiser, Harry M., Generic Advertising in an Asymmetric Cournot Oligopoly (November 4, 2009). American Journal of Agricultural Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1499859

Yuqing Zheng (Contact Author)

University of Kentucky - College of Agriculture - Department of Agricultural Economics ( email )

Lexington, KY 40546
United States

Talia R. Bar

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

Harry M. Kaiser

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States
607-255-1598 (Phone)
607-254-4335 (Fax)

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