Persuading Consumers with Social Attitudes

22 Pages Posted: 3 Jun 2011

See all articles by Daniel Halbheer

Daniel Halbheer

HEC Paris - Marketing

Stefan Buehler

University of St. Gallen - SEPS: Economics and Political Sciences

Date Written: May 31, 2011

Abstract

This paper analyzes persuasive advertising and pricing in oligopoly if firms sell differentiated products and consumers have heterogeneous social attitudes towards the consumption by others. Deriving product demand from primitives, we show that the demand-enhancing effect of persuasive advertising varies across consumers and increases in the average degree of conformity. In equilibrium, both quality and cost leaders choose higher advertising intensities and charge higher prices than their competitors. In addition, we show that an increase in the average degree of conformity among consumers reinforces asymmetries between firms.

Keywords: advertising, social attitude, consumption externality, quality

JEL Classification: D110, D430, L150, L210, M370

Suggested Citation

Halbheer, Daniel and Buehler, Stefan, Persuading Consumers with Social Attitudes (May 31, 2011). CESifo Working Paper Series No. 3470, Available at SSRN: https://ssrn.com/abstract=1855946

Daniel Halbheer

HEC Paris - Marketing ( email )

Paris
France

Stefan Buehler (Contact Author)

University of St. Gallen - SEPS: Economics and Political Sciences ( email )

FGN-HSG
Varnbuelstr. 19
CH-9000 St. Gallen
Switzerland
+41-71-224-2303 (Phone)

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