An Analysis of Advertising Wars

25 Pages Posted: 30 Dec 2010

See all articles by Subhadip Chakrabarti

Subhadip Chakrabarti

Queen's University Management School

Hans H. Haller

Virginia Polytechnic Institute & State University - Department of Economics

Date Written: December 16, 2010

Abstract

Comparative advertising by one brand against another showcases its merits versus the demerits of the other. In a two-stage game with finitely many firms, firms decide first how much to advertise against whom. In the second stage, given the advertising configuration, firms compete as Cournot oligopolists. In the symmetric case, equilibrium advertising constitutes a clear welfare loss. In the asymmetric case, depending on parameter values, a variety of outcomes are possible in equilibrium. An a priori disadvantaged firm (in terms of advertising costs or advertising effectiveness) may advertise more. Advertising can affect firms that are not advertisers or targets themselves.

Suggested Citation

Chakrabarti, Subhadip and Haller, Hans H., An Analysis of Advertising Wars (December 16, 2010). The Manchester School, Vol. 79, Issue 1, pp. 100-124, 2010, Available at SSRN: https://ssrn.com/abstract=1732462 or http://dx.doi.org/10.1111/j.1467-9957.2010.02187.x

Subhadip Chakrabarti

Queen's University Management School ( email )

25 University Square
Belfast, Northern Ireland BT7 1NN
Northern Ireland
+44 0 28 9097 3273 (Phone)

HOME PAGE: http://www.qub.ac.uk/schools/SchoolofManagementandEconomics/Staff/ChakrabartiSubhadip/

Hans H. Haller

Virginia Polytechnic Institute & State University - Department of Economics ( email )

3021 Pamplin Hall
Blacksburg, VA 24061
United States
540-231-7591 (Phone)
540-231-5097 (Fax)

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