| Price Competition and Advertising Signals Contributor(s): Penny Hill Press (Editor), Federal Trade Commission (Author) |
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ISBN: 1530892406 ISBN-13: 9781530892402 Publisher: Createspace Independent Publishing Platform OUR PRICE: $12.30 Product Type: Paperback - Other Formats Published: April 2016 |
| Additional Information |
| BISAC Categories: - Business & Economics | Advertising & Promotion - Business & Economics | Industries - General |
| Dewey: 338.604 |
| Physical Information: 0.1" H x 8.5" W x 11.02" (0.31 lbs) 50 pages |
| Descriptions, Reviews, Etc. |
| Publisher 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. |