With a Little Help from My Enemy: Comparative Advertising as a Signal of Quality

University of Bologna Working Paper No. 441

32 Pages Posted: 31 Jul 2002

See all articles by Francesca Barigozzi

Francesca Barigozzi

University of Bologna - Department of Economics

Paolo G. Garella

Department of Economics, Management, and Quantitative Methods

Martin Peitz

University of Mannheim - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: 2006

Abstract

Comparative advertising content differs from generic. We discover that dissipative advertising has consequences depending upon content and cost. Comparison advertising may trigger legal action by rival firms that are named. In the model an entrant signals its product quality. By a comparative ad the entrant refers to the incumbent's product. We show that comparison can enhance the signaling potential of dissipative advertising. From the viewpoint of the entrant, the choice of comparative advertising empowers the rival with the right to sue; generic does not. Consumers therefore infer that if the entrant uses comparative instead of generic ads it has a strong case.

Keywords: Quality, signaling, advertising, entry, competition

JEL Classification: L15, M37, L13

Suggested Citation

Barigozzi, Francesca and Garella, Paolo G. and Peitz, Martin, With a Little Help from My Enemy: Comparative Advertising as a Signal of Quality (2006). University of Bologna Working Paper No. 441, Available at SSRN: https://ssrn.com/abstract=318959 or http://dx.doi.org/10.2139/ssrn.318959

Francesca Barigozzi

University of Bologna - Department of Economics ( email )

P.zza Scaravilli 2
40126 Bologna, 40126
Italy

Paolo G. Garella

Department of Economics, Management, and Quantitative Methods ( email )

Via Festa del Perdono, 7
Milan, 20122
Italy

Martin Peitz (Contact Author)

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany
+49 621 181-1835 (Phone)

HOME PAGE: http://peitz.vwl.uni-mannheim.de/

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