Non-Comparative Versus Comparative Advertising of Quality
International Journal of Industrial Organization, Forthcoming
CIRPEE Working Paper No. 11-39
30 Pages Posted: 14 Dec 2011 Last revised: 23 Jan 2012
There are 2 versions of this paper
Non-Comparative versus Comparative Advertising of Quality
Date Written: December 1, 2011
Abstract
Two firms produce a good with a horizontal and a vertical characteristic called quality. The difference in the unobservable quality levels determines how the firms share the market. We consider two scenarios: in the first one, firms disclose quality; in the second one, they send costly signals thereof. Under non-comparative advertising a firm advertises its own quality, under comparative advertising a firm advertises the quality differential. In either scenario, under comparative advertising the firms never advertise together which they may do under non-comparative advertising. Moreover, under comparative advertising firms do not advertise when the informational value to consumers is small.
Keywords: Quality, advertising, disclosure, signalling
JEL Classification: D82, L15, M37
Suggested Citation: Suggested Citation
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