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The Advertising Mix for a Search Good

Renault, Régis; Anderson, Simon P. (2013), The Advertising Mix for a Search Good, Management Science, 59, 1, p. 69-83. http://dx.doi.org/10.1287/mnsc.1120.1575

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Type
Article accepté pour publication ou publié
Date
2013-01
Journal name
Management Science
Volume
59
Number
1
Publisher
INFORMS
Pages
69-83
Publication identifier
http://dx.doi.org/10.1287/mnsc.1120.1575
Metadata
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Author(s)
Renault, Régis
Anderson, Simon P.
Abstract (EN)
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.
Subjects / Keywords
Persuasion game; Search; Content analysis; Advertising; Equilibrium; Information; Learning
JEL
L15 - Information and Product Quality; Standardization and Compatibility
D42 - Monopoly
M37 - Advertising
D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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