Comparative advertising: disclosing horizontal match information

Renault, Régis; Anderson, Simon P.

Renault, Régis; Anderson, Simon P. (2009), Comparative advertising: disclosing horizontal match information, RAND Journal of Economics, 40, 3, p. 558-581. http://dx.doi.org/10.1111/j.1756-2171.2009.00077.x

Type

Article accepté pour publication ou publié

Date

2009

Journal name

RAND Journal of Economics

Volume

Number

Publisher

Wiley-Blackwell

Pages

558-581

Abstract (EN)

Improved consumer information about horizontal aspects of products of similar quality leads to better consumer matching but also to higher prices, so consumer surplus can go up or down, while profits rise. With enough quality asymmetry, though, the higher-quality (and hence larger) firm's price falls with more information, so both effects benefit consumers. This occurs when comparative advertising is used against a large firm by a small one. Comparative advertising, as it imparts more information, therefore helps consumers. Although it also improves the profitability of the small firm, overall welfare goes down because of the large loss to the attacked firm.

Subjects / Keywords

Comparative advertising; information; product differentiation; quality

JEL

D42 - Monopoly
L15 - Information and Product Quality; Standardization and Compatibility
M37 - Advertising