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Author:
Publisher:
ISBN:
Category : Advertising
Languages : en
Pages : 44
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Book Description
Author: Federal Trade Federal Trade Commission
Publisher: CreateSpace
ISBN: 9781514156995
Category :
Languages : en
Pages : 48
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Book Description
Can price and advertising be used by vertically differentiated duopolists to signal qualities to consumers? We show that pure price separation is impossible if the vertical differentiation is small, while adding dissipative advertising ensures existence of separating equilibria. Two simple, but non-standard, equilibrium refinements are introduced to deal with the multi-sender nature of the game, and they are shown to produce a unique separating and a unique pooling profile. Pooling results in a zero-profit Bertrand outcome. Separation gives strictly positive duopoly profits, and dissipative advertising is used by the high-quality firm when products are sufficiently close substitutes. Finally, depending on the differentiation, the separating prices of both firms may be distorted upwards or downwards compared to the complete information benchmark.
Author:
Publisher:
ISBN:
Category : Advertising
Languages : en
Pages : 44
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Book Description
Author: Federal Trade Federal Trade Commission
Publisher: Createspace Independent Publishing Platform
ISBN: 9781530892402
Category :
Languages : en
Pages : 48
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Book Description
Can price and advertising be used by vertically differentiated duopolists to signal qualities to consumers? We show that pure price separation is impossible if the vertical differentiation is small, while adding dissipative advertising ensures existence of separating equilibria. Two simple, but non-standard, equilibrium refinements are introduced to deal with the multi-sender nature of the game, and they are shown to produce a unique separating and a unique pooling profile. Pooling results in a zero-profit Bertrand outcome. Separation gives strictly positive duopoly profits, and dissipative advertising is used by the high-quality firm when products are sufficiently close substitutes. Finally, depending on the differentiation, the separating prices of both firms may be distorted upwards or downwards compared to the complete information benchmark.
Author: Mark N. Hertzendorf
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
Author: Michael Bungert
Publisher: Deutscher Universitätsverlag
ISBN: 9783824479566
Category : Business & Economics
Languages : en
Pages : 240
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Book Description
Michael Bungert investigates the possibility to terminate (non-beneficial) price wars through appropriate signals and analyzes the effect of different types of signals on the price reaction behaviour of a competitor. He demonstrates that all signal types show a significant effect on the probability of a co-operative price reaction.
Author: Fulan Wu
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper develops a model in which a firm can use price and advertising jointly as a signal of their private choice of quality, whereby quality is endogenously chosen by firms. The monopoly model reveals that there exists a unique equilibrium in which the monopolist chooses high quality but a higher level of advertising compared to the full-information benchmark. The model is then extended to the case with competition of two imperfectly competitive firms. We find that if competition is not strong enough, then there exists a unique symmetric equilibrium in which both firms choose high quality. The equilibrium outcome shows that both firms will set lower prices and a higher level of advertising as compared to the monopoly case. Interestingly, we find that more competition might lead to a loss of social welfare due to the increasing level of advertising for quality signaling. The numerical results further demonstrate that as competition gets more intense from the monopoly, prices decrease initially, the level of advertising increases, and social welfare decreases, which may make a ban on advertising more recommendable after a certain threshold.
Author: Paul Robert Milgrom
Publisher:
ISBN:
Category : Advertising
Languages : en
Pages : 28
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Book Description
Author: Juan Feng
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Performance-based advertising is becoming increasingly popular in the online advertising industry, where the advertiser pays to the publisher only when an "action" (e.g., a click-through) is generated by the advertisement. We study how the performance-based advertising scheme affects one of the fundamental functions of advertising - signaling product quality. We identify two critical factors that affect the signaling function of advertising under performance-based pricing: (1) the demand uncertainty factor, which measures advertisers' uncertainty about their potential market, and (2) the advertising performance over-measure factor, which describes the extent to which product performance accounts for advertising performance. We find that the uncertainty factor facilitates, but the over-measure factor impedes (or even destroys) the signaling function of performance-based advertising. Specifically, our results show that in the presence of the over-measure factor, switching from impression-based to performance-based advertising: (a) reduces the number of situations in which advertising can be used to signal quality, (b) increases the prices charged to consumers, (c) increases the expected advertising expenditure if the cost differentiation between the high- and low-quality firms is sufficiently high, but decreases the expected advertising expenditure otherwise, and (d) increases the advertiser's profit if the over-measure factor is low but the uncertainty factor is high, and decreases the profit otherwise.
Author: W. Jason Choi
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Recent privacy regulations and firm policies endow consumers with the choice of whether to allow firms to use their personal data for marketing (and other) purposes. We investigate the impact of consumer data privacy choices on the advertising ecosystem. We consider a scenario with competing horizontally differentiated firms that advertise to heterogeneous consumers, through an ad platform, to be considered by the consumers. If a consumer opts in, she provides an imperfect signal of her type, based on which the ad platform can price ads, and the firms can target ads and prices. Consumers make privacy choices by considering their surplus utility from product consumption. In particular, they consider two countervailing effects of opting-in to allow firms to use their data: (i) opting-in, while weakly increasing the relevance of ads served, exacerbates price discrimination by firms; and (ii) opting-in facilitates firms' inferences about the consumers' types, which intensifies price competition. These effects depend crucially on the consumers' ad exposure histories, which in turn are determined endogenously by the ad platform's ad pricing strategy. Compared to a benchmark where all consumers are opted-in to data sharing, with privacy choices consumers' surpluses are weakly higher, the firms' profits are weakly lower, and the ad platform's profit is either lower or higher depending on the signal accuracy and extent of product differentiation. We examine the robustness and boundaries of our insights by considering extensions and alternative models.
Author: Pepall, Lynne
Publisher: Edward Elgar Publishing
ISBN: 1788978129
Category : Business & Economics
Languages : en
Pages : 294
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Book Description
This accessible and comprehensive textbook explores the role of advertising in the marketplace. It investigates how firms’ advertising strategies are informative, persuasive or add value to the product advertised. The book explains in detail empirical methodologies used to identify the impact of advertising on consumer demand and on market structure and reviews some recent empirical findings. It concludes with an in-depth exploration of digital advertising and auctions along with a framework for current antitrust investigations into two-sided platforms (Google, Facebook) that are funded by advertising revenues.
