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

Nom de la revue

RAND Journal of Economics

Volume

Numéro

Éditeur

Wiley-Blackwell

Pages

558-581

Résumé (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.