The Advertising Mix for a Search Good

34 Pages Posted: 20 Jan 2012

See all articles by Simon P. Anderson

Simon P. Anderson

University of Virginia - Department of Economics

Régis Renault

University of Cergy-Pontoise - THEMA

Date Written: January 2012

Abstract

We extend the persuasion game to bring it squarely into the economics of advertising. We model advertising as exciting consumer interest into learning more about the product, and determine a firm's equilibrium choice of advertising content over quality information, price information, and horizontal match information. Equilibrium is unique whenever advertising is necessary. The outcome is a separating equilibrium with quality unravelling. Lower quality firms need to provide more information. For a given quality level, as a function of consumer visit costs, first quality information is disclosed, then price information and then horizontal product information are added to the advertising mix. Some suggestive evidence is provided from airline ads in newspapers.

Keywords: advertising, content analysis, information, persuasion game, search

JEL Classification: D42, L15, M37

Suggested Citation

Anderson, Simon P. and Renault, Régis, The Advertising Mix for a Search Good (January 2012). CEPR Discussion Paper No. DP8756, Available at SSRN: https://ssrn.com/abstract=1988687

Simon P. Anderson (Contact Author)

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States
804-924-3861 (Phone)
804-982-2904 (Fax)

Régis Renault

University of Cergy-Pontoise - THEMA ( email )

33 boulevard du port
F-95011 Cergy-Pontoise Cedex, 95011
France
+33 1 34 25 6173 (Phone)

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