Demand Expansion and Elasticity Improvement as Complementary Marketing Goals

14 Pages Posted: 30 Dec 2010  

Christine Halmenschlager

University of Paris II Pantheon-Assas - ERMES

Andrea Mantovani

University of Bologna

Michael Troege

ESCP-Europe

Date Written: December 16, 2010

Abstract

Consider a marketing division of a monopoly that faces two marketing options: market enlargement and elasticity improvement. These options are conceived in terms of the target of the firm's advertising campaigns: potential new consumers versus existing consumers. Using a CES demand function in a simple model, we show that the two activities are complementary, so that for some cost configurations, the firm will find it profitable to jointly implement the two options together when either option alone would result in a loss. The same joint implementation conclusion also holds for consumer surplus, and hence a fortiori also under a social welfare objective.

Suggested Citation

Halmenschlager, Christine and Mantovani, Andrea and Troege, Michael, Demand Expansion and Elasticity Improvement as Complementary Marketing Goals (December 16, 2010). The Manchester School, Vol. 79, Issue 1, pp. 145-158, 2010. Available at SSRN: https://ssrn.com/abstract=1732458 or http://dx.doi.org/10.1111/j.1467-9957.2010.02181.x

Christine Halmenschlager (Contact Author)

University of Paris II Pantheon-Assas - ERMES ( email )

12 Place du Panthéon
Paris, Cedex 5, 75005
France

Andrea Mantovani

University of Bologna ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy

Michael Troege

ESCP-Europe ( email )

79, Avenue de Republique
75543 Paris, Cedex 11, 75011
France
33/149232601 (Phone)

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